4 Factors to Help You Decide When to Exercise Your Employee Stock Options

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4 Factors to Help You Decide When to Exercise
Your Employee Stock Options
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• Some experts recommend you should hold onto your
  employee stock options as long as possible for
  you. When the expiration dates are near, then you
  have got the liberty to exercise them freely. It
  gives the stock an opportunity for additional
  price appreciation. However, this could backfire
  as well, as you may seem prices going down when
  your stock nears its expiry. So, definitely this
  advice is not favourable for everyone.

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• There are many factors which must be taken into
  consideration about deciding when to exercise
  employee stock options, such as- circumstances,
  comfort level with risk, tax situation should be
  taken into consideration. Given below are the
  four factors that will help you determine the
  best time for exercising employee stock options

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1. Financial Circumstances
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If you are not ready to execute the options
because you are hoping that stock price will ramp
up, then consider your current requirement for
cash in comparison to the potential of additional
gains. If you are in dire need of funds and your
options have value, then exercise them as soon as
you can. A higher stock price in the future is
uncertain. There are various reasons to exercise
them early such as- a sudden illness, funds for a
down payment on a house or vehicle, another
opportunity in which you can invest gain
profits, etc.
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2. The Return/Risk Trade-off
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Value is an integral component of employee stock
options (ESO). Time value will increase if there
are many years left for the expiration date.
Along with time value, the risk of stock going
down keeps on scaring people. The gains you would
realize by exercising today would disappear.
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• You might want to withdraw risk and drop
  potential additional benefits if
• Present availability of funds in hand could
  bestow a significant improvement in your
  financial situation based on your financial
  requirement.
• Prospects for the company stock look attractive
  doesnt look promising to you

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3. Tax-Planning Opportunities
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Tax planning involves calculating your expected
income and deductions over the upcoming years.
Exercising all your options too soon or in one
year could make you fall into a higher tax
bracket. There may be tax reasons to exercise
some options at present and rest of the options
in the later years. It might be a sensible idea
to exercise some options every year rather than
wait until the expiration date to exercise
employee stock option at all.
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4. Markets State
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The volatility of your company stock and the
inconsistency of market conditions should be
considered as a whole. The market will neither be
always in your favour nor against you.
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You can reduce the chances of risk and boost
returns by utilizing advanced strategies that
consist of selling calls and buying puts on the
company stock. Consider all factors to make a
smart decision that favours your requirements to
exercise stock options in a beneficial way.
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• 1 [phone]
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