Intel Corporation (INTC) Message Board

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Technology Stocks : Intel Corporation (INTC)

INTC 41.14

-3.4%

Jan 8 3:59 PM EST

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To: Elmer Phud who wrote (178332)	6/16/2004 9:54:04 PM
From: rkral	of 186894

OT .. elmerp, re "It was just a bad analogy on your part." Nope, it was just bad understanding (of the point) on your part. Whether or not the option is exercised has nothing to do with it. Try to follow the scenarios below carefully. Skip the tax portions (in parentheses) if simplicity required. Scenario A: The holder of an open-market option purchases a call option for $X (after-tax). Scenario B: The holder of an equivalent employee stock option -- same company, same exercise, and then whatever additional is required so as to have the same value as in Scenario A -- works for the company for the duration of the vesting period in order to earn the option. This is the barter to which I referred. On the basis of economic equivalence .. and since both options have the same value .. the employee has effectively earned $X (on which he/she paid no taxes) and purchased the ESO for $X. The $X had to come from somewhere. Do you know where it came from? Ron

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