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Strategies & Market Trends : Zeev's Turnips - No Politics -- Ignore unavailable to you. Want to Upgrade?

To: Timothy Liu who wrote (98548)	8/25/2002 1:22:42 AM
From: mishedlo	Read Replies (1) \| Respond to of 99280

the company should realize a gain first Realize a gain? Gain on what. Options had to be bought. A better way of thinking about this is a company should have to BUY leap calls. Company gives leap calls to employees (with strings attacahed based on performence, staying with the company or whatever). Those calls IT HAD TO BUY. Those calls are an expense. That expense should be taken IMMEDIATELY. In most cases the company is acting as its own broker by being the market maker. Those calls still cost the company something IF and when they are exercised (and that is where accounting gets sort of muddled). The options may expire worthless and thus there is no expense. The options may increase in value so taking an expense based on black sholes at the time of issue might way underestimate the actual expense down the road. The simple solution to this mess is have the company buy leap calls (end of problem immediately as surely EVEN YOU sees this as an expense), or account for the options at intrinsic value which can change quarter to quarter but the accounting is easy. But NOWHERE ANYWHERE was there EVER any gain to the company EVER in any conceivable fashion casue the company did not sell options it BOUGHT THEM, either with hard cash or company stock, or when exercised with stock at the market. No matter which way you turn it is an expense. Gain on selling options. Where the H is the sale? This is totally nuts. M