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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: hueyone who wrote (52100)7/15/2002 1:48:34 PM
From: EnricoPalazzo  Read Replies (2) of 54805
 
Therefore, I would venture to say that it appears very likely that S&P is using the Black Scholes estimates (SFAS 123) for options expense that companies provide in their notes to the 10ks.

which will slightly (although not, i think, materially) overstate the cost, since an employee stock option is slightly less valuable than a "normal" stock option with the same strike price and duration--this is because in order to exercise it, you need to stay with the company.

To think about it in another way, 99% of people who quit SEBL will leave some (unvested or out of the money) options on the table.

Ethan
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