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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: The Phoenix who wrote (41303)	10/23/2000 12:22:25 PM
From: bambs	Read Replies (2) \| Respond to of 77400

Gary, It's simple. there are options out there. The stock doubled last year. The option debt then more then doubles. say there is a million options with a strike price of 25 the stock traded at 30 last year. The stock doubles to 60 the option liability that the company has goes from 5 a share to 35 a share. do you get it?

To: The Phoenix who wrote (41303)	10/23/2000 12:22:52 PM
From: GVTucker	Read Replies (1) \| Respond to of 77400

Gary, RE: If the 'cost' is higher isn't the exposure lower since the gain is lower and it's the gain that the taxes are paid against. Right? Nope. The higher the stock goes, the higher the 'cost' goes, and the higher the exposure goes. The stock drops and the 'cost' drops, even though that would seem to be counter-intuitive. The company is giving the employee an option in lieu of cash as part of compensation. If you convert the options into their cash value and then count that as compensation expense to Cisco, that is where you get to what I am calling a 'cost' here. These are essentially call options these employees own. Thus, as the stock rises, these call options also rise in value, thus seemingly increasing the 'cost'.