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Strategies & Market Trends : Employee Stock Options - NQSOs & ISOs -- Ignore unavailable to you. Want to Upgrade?

To: hueyone who wrote (198)	8/17/2002 11:42:59 PM
From: Ted The Technician	Read Replies (1) \| Respond to of 786

Huey, good point about the amortizing of the options expenses over the vesting period (or til the employee gets terminated). That should smooth out the quarter-to-quarter variances over a 3-6(?) year period. This smoothing just adds to the complexity of the analysis. Early termination of employees (and therefore reducing the option expenses) would simplify my calculations. ; ) Option grant expenses could vary significantly from year to year. ELON's 2001, 2000, and 1999 option grant expenses were $30M, $22M, and $13M respectively. The highs of ELON for 2001, 2000 and 1999 was $32, $113, and $19. It is now around $13. Assuming that a company typically issues 2-3% of its outstanding shares (as suggested by Ron) as options, the total cost of the options grants for new option programs (new strike prices) should rise as the stock prices rise. The interesting thing that I see is that just when the new option programs cost the most to the company (when the stock price is at its highs), the eventual cost to the shareholder will be the least as these options expire out-of-the-money. I could see option grant expensing dampening stocks from rising so high because of its negative impact to EPS and therefore reduce the risk of employees being stuck with worthless options. The opposite should be true when the stock price is at its lows. IMHO, options (when the details are fully disclosed) should lower the price ceiling and raise the price floor of a stock assuming all other items are equal.