StockOpter Advisor News: January 2012

Now that we are one month into 2012 please be aware that our main goal this year is to help you to drive more business. So these monthly new briefs will contain a variety of ideas & resources to help you to engage employees with equity compensation and to provide them with prudent advice. If you are considering offering employee workshops on equity compensation please let me know and we'll setup a conference call to discuss your plans and how...

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Black-Scholes Value and Employee Stock Options (Part 2)

A StockOpter White Paper This section builds upon the material presented in Black-Scholes Value and Employee Stock Options Part I. It gives the actual BSV equation and explores some of the associated issues in somewhat more depth. Variables and Equations Let: C = the value of a call stock option. S = the current price of the stock. X = the strike price, also called the exercise price. r = the continuously-compounded annualized risk-free interest rate. q = the continuously-compounded...

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Black-Scholes vs. Binomial Lattice for ESO Valuation

A StockOpter White Paper StockOpter.com is designed to educate employee stock option (ESO) holders about this fabled form of compensation.  A key part of understanding ESOs is understanding that an option of any kind (employee or market traded) has a value unique to the characteristics of the option.  Fortunately, there are widely accepted algorithms for estimating this value.  The two most common are the Black Scholes Merton model and the Cox-Ross-Rubenstein Binomial Lattice model.  Both models were created primarily for...

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Black-Scholes Value and Employee Stock Options (Part 1)

A StockOpter White Paper Employee Stock Options (ESOs) are still an important part of many companies’ executive compensation programs. Unfortunately, there are difficulties in determining precisely what they are worth. The requirement to account for ESOs as expenses in corporate financial statements has increased the focus on the question of what they are worth. However, the approach for valuing ESOs for accounting purposes may not be the best way to look at ESOs for other purposes, such as deciding when...

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