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Technology Stocks : Intel Corporation (INTC)
INTC 45.51+10.7%Jan 9 9:30 AM EST
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To: Elmer Phud who wrote (177813)5/6/2004 9:43:05 PM
From: ptanner  Read Replies (1) of 186894
 
re: "Again, I can see value to the receiver but I just don't see any expense to the grantor except opportunity lost in the CC premium."

What if instead of an option the company gives the employee shares of stock? Would this be considered an expense since the company could just 'print up another one'? I think it would be.

Or closer to the question at hand. If the company bought calls costing $N and gave these to the employees then this also would seem to clearly be an expense (IMHO).

In fact, a company could cover the uncertainty with the future exercise of option grants through purchasing a corresponding set of calls. This would be a share neutral position and have a specific cost. This cost would most likely be essentially the same as the present method of assigning a value to the options grants. This assumes the present guidelines require the use of values (volatility, interest - time value) similar to those of the company's stock/option history.

re: "Doesn't this also assume that the grantor would have sold CCs if they hadn't granted the options instead? Again, I can see value to the receiver but I just don't see any expense to the grantor except opportunity lost in the CC premium."

I think it assumes the grantor could have sold CC instead and provides a reasonable valuation for a comparable transaction for which the proceeds of selling the calls accrues to the grantee rather than the company. Isn't this 'opportunity cost' to the grantor exactly what the proposed option expensing amount would correspond to?

You write options. If I asked you to *give* me 100 covered calls wouldn't you consider this to be an expense? How would you value it?

-PT
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