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Technology Stocks : How high will Microsoft fly? -- Ignore unavailable to you. Want to Upgrade?

To: jonkai who wrote (72198)	8/20/2002 12:21:51 AM
From: Charles Tutt	Read Replies (1) \| Respond to of 74651

Just about everybody has (at least) two (virtual) sets of books. It's almost impossible not to -- the tax laws don't necessarily track GAAP. JMHO. Charles Tutt (SM)

To: jonkai who wrote (72198)	8/20/2002 1:00:32 AM
From: sandeep	Read Replies (1) \| Respond to of 74651

I don't understand what you are talking about. Let's say Company X issues a 10-year option (BTW, B-S doesn't really capture this so well) to its employees on July 31st. How should it calculate the option price? There really is no market for such a long term option. So, only B-S will have to be used. Should it use the volatility of the last 10 years? The company may not be that old. What should it do? Should it use for the last 2 years? 3 years? What happens if it issues options when stock price is at 100 and 3 months later it is at 10? Definitely the "cost" it reported 3 months ago is now no longer even close. So, should it restate old earnings or should it increase earnings this quarter. Or should it recalculate cost of options every quarter - as B-S model for the next 3 months for unexercised options and adjust real cost next quarter? But in the last model, the cost of the 10 year option will definitely mis-represented. I don't know now how to apply "cost" of these options. I am confused. Junkie, please help!