What is an excercisable option (stocks for high level officials)?
Question:
Answer:
it's called insider trading and could be illegal
- an exec, and informed on my legal and ethical trading practices. to trade for you own profit based on non publicly disclosed info can have serious penalties. not knowing all the circumstances, no judgment passed, but he rule of thumb is to avoid all appearance of impropriety.
if his options are exercised on a predetermined schedule, it is a bit more kosher. perhaps the timing is co-incidental---
Exec get option which they can excersied after certain time passed. Yes many executives do, some times they do not want to hold stocks or wants cash to invest some where else. So there is no reason, if executives execised their option is bad thing.
Without knowing more about the company's situation, I can't say. Execs will excercise options when the economic benefit of the option is greatest. The underlying reasons, however, are not the same across the board.
Execs are just just like normal people, except that they have more money. They have cash-flow needs just as everbody does. Maybe he's excercising the options to buy a new home, to pay college tuition for his child, or maybe he's about to retire and wants to make his portfolio more liquid/diversified, whatever.
There is a possibility that he's excercising the options and selling the stock b/c he doesn't like the direction of the company, which in that case might be a troubling signal.
You can check Yahoo Finance and view the insider trading activity for that particular company. If you see that this is a pattern among other execs at the company, it may be an indication that the company is struggling. If, however, you only see that one trade in the past few weeks/months, it may mean nothing.
This is highly unusual and I don't see any reason for giving such options. I personally have never seen it or heard about it.
Most companies give there execs Call options (the right to buy shares of the company; call options are only interesting if the value of the shares would increase), your company has given Put options (the right to sell the shares; it's only interesting if the company wants a lower shareprice).
Options that are given to an exec by the company are not completely comparable to options you buy on the "options exchange", the company will require that you keep the shares for some time. Is it possible that in this particular case the exec bought his put options on the market and sold them (with a profit) after the lost of the contract? I'm not sure of this is illegal or even has to be reported to the SEC as insider trading.
An exercisable option is an option that is under the money. Every option has a predetermined price ("execution price") at which the transaction should be executed. A call option gives the right to buy the share at a certain preset price. "In the money" for a call option means the share price is above the execution price. A put option gives the right to sell the share at the execution price, "in the money" here means the execution price is higher than the market value.
More Questions & Answers...