Stock Options For Dummies
by Alan Simon
Stock Options For Dummies
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Copyright 2001 by Wiley Publishing, Inc., Indianapolis, Indiana
Published simultaneously in Canada
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Library of Congress Control Number: 00-112156
ISBN: 978-0-7645-5364-6
Manufactured in the United States of America
10 9 8
1B/QX/QV/QR/IN
About the Author
Alan Simon is a computer consultant, author of 26 books (including Data Warehousing For Dummies), and farmer. He has held a number of executive positions in technology consulting firms, and has been a computer professional since the late 1970s. His extensive experiences with his own stock options sometimes painful experiences have provided him with an objective, no-hype perspective of stock options that he imparts in this book.
Alan lives on a farm in Northeastern Pennsylvania.
Authors Acknowledgments
Id like to thank the editors with whom I worked on this project including Jonathan Malysiak, Keith Peterson, and Suzanne Thomas for their valuable assistance with this book. I would also like to thank Matt Wagner of Waterside Productions. Jay Klapper, Keren Hamel, and Scott Temares provided valuable assistance with stock option anecdotes and experiences. I would also like to thank Bruce Brumberg of MyStockOptions.com; Wade Williams of MyOptionValue.com; Thomas Grady of StockOptionsCentral.com; and Dale Krieger of Stock-Options.com.
Publishers Acknowledgments
Were proud of this book; please send us your comments through our Dummies online registration form located at www.dummies.com/register/
Some of the people who helped bring this book to market include the following:Acquisitions, Editorial, and Media Development
Project Editor: Keith Peterson
Acquisitions Editors: Mark Butler, Jon Malysiak
Copy Editor: Suzanne Thomas
Acquisitions Coordinator: Lauren Cundiff
Technical Editor: Sandra Sussman
Editorial Manager: Pam Mourouzis
Editorial Assistant: Carol Strickland
Cover Image: Scott Barow/Imagestate 2005
Composition
Project Coordinator: Dale White
Layout and Graphics: Joe Bucki, Heather Pope, JeremeyUnger
Proofreaders: David Faust, Aptara Production Services
Indexer: Aptara Production Services
Publishing and Editorial for Consumer Dummies
Diane Graves Steele, Vice President and Publisher, Consumer Dummies
Joyce Pepple, Acquisitions Director, Consumer Dummies
Kristin A. Cocks, Product Development Director, Consumer Dummies
Michael Spring, Vice President and Publisher, Travel
Brice Gosnell, Associate Publisher, Travel
Suzanne Jannetta, Editorial Director, Travel
Publishing for Technology Dummies
Andy Cummings, Vice President and Publisher, Dummies Technology/General User
Composition Services
Gerry Fahey, Vice President of Production Services
Debbie Stailey, Director of Composition Services
The publisher would like to give special thanks to Patrick J. McGovern, without whom this book would not have been possible.
Introduction
E ven though an estimated 12 million U.S. employees have stock options as a key component of their respective compensation packages, many of those people understand only the most basic aspects of their stock options.
This lack of stock option knowledge, however, is understandable when you realize how most companies handle the granting of stock options to their employees. When a job offer is extended, a representative from the HR (Human Resources) department will usually follow up the salary offer with a bland, imprecise statement, something along the lines of oh, yeah, you also get 5,000 stock options.
But no mention of the vesting schedule for those shares, no mention of how the strike price for those 5,000 shares will be set, and usually no mention of what kind of stock option grant you will receive an incentive stock option (ISO) grant or a nonqualified stock option (NQSO) grant, each with different tax consequences. (If this book is your first exposure to the world of stock options, dont worry about the terminology in the preceding paragraph: I cover those terms along with other stock option basics in Chapter 1.)
Why I Wrote This Book: The Lessons of 1999 and 2000