If you are on the receiving end of employee stock options, you might want to understand the concept of leverage, as it may have a meaningful impact on the future ...
If you are on the receiving end of employee stock options, you might want to understand the concept of leverage, as it may have a meaningful impact on the future value of your stock. As it relates to employee stock options, leverage is illustrated by the percentage change you see in the total value of your employee stock options as a result of a change in the value of the underlying stock price itself. If the percentage change in the value of your employee stock options is greater than the percentage change of the stock price, you have leverage. With employee stock options, you likely can’t eliminate the issue of leverage altogether as it is inherent. You can however, begin to understand leverage by knowing how, when, and by how much it may impact the value of your employee stock options. This can arm you with the information you need to make appropriate decisions on what to do next. Let’s take a deeper dive to see the impact of leverage under different scenarios. The Impact of Leverage on Employee Stock Options To illustrate leverage, let’s assume that you have 10,000 employee stock options with an exercise price of $10 per… Read More »
