Receiving a stream of stock options from your employer can be an incredible benefit, but how much? Our calculator can help you assess precisely what you might get from your company's stock option grants. You just have to add some details about the stock's current market price and the value it appreciates at. You can also add any additional annual grants over any length of time to see the total worth of your stock options. This can help you decide if it is worth accepting the options as a form of compensation.
If you want to know the value of a single option grant,
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What are stock options?
Many companies offer stock options, which are shares of the business, to their executive employees as a form of compensation. Annual option grants are typically used to give workers incentive for their performance. By giving employees stock options, part or all of their compensation becomes directly tied to the success of the company. This can ensure employee initiative to propel the business forward.
If you are receiving option grants they can present a unique investment opportunity. You will be able to buy or sell the shares granted to you for a set price, regardless of how the stock is performing in the market. That means with the right prediction of a company’s performance, you could really maximize your earnings. Stocks can be complicated, so you will need a process-driven strategy when evaluating your options to make the best financial decision.
How can I cash out my options?
There are a couple things to keep in mind before
. Exercising is a legal term that means to put into effect a right that is specified in a contract. As an option holder, you have the right to buy or sell the underlying company shares at a specified price on or after a future date. That preferential price of the shares is the
, while the future date refers to your
. You have to wait until that date to exercise your options.
Once you pass the vesting period in your contract you can begin to buy or sell the shares you’ve been granted. In simplest terms, when the stock price in the market becomes greater than your strike price, you can profit from selling your shares. Your final earnings would be your total profits, minus your cost to get the options. There are many intricacies to the stock market not covered by the content on this page. Thus, it is important to do additional research or consult with a trusted advisor concerning your situation.
How accurate is the calculator?
The calculator is accurate in its assessment of the future value of your stock option grants. However, since these grants are tied to the potential performance of the company all scenarios are purely hypothetical. There may be unanticipated variables that may increase or decrease the future value of the stocks. So it’s likely that you will do the calculations on a recurring basis.
This calculator has some limitation in estimating your final earnings. It does not take into account
any taxes that you may be subject to
, so further work may be needed to assess the after-tax value of your earnings.
Using the calculator
The annual stock option calculator is very easy to use. You just have to supply some information about your company’s stock options. Let’s review this together starting with the
current stock price
: You can add the
current stock value
to the first line of the calculator. You can use the up or down arrows to make this input easier. This is the current market price of the company stocks.
: On the second line of the calculator you should include the value that the
stock appreciates at
. This is the rate of growth that is expected from the underlying shares of the issued options.
: The third line of the calculator requires the
number of years
you expect to hold these options. You may add any value between 3 and 25 years here.
: Finally on the fourth line you should include the amount of
option grants you will be given each year. This amount is pre-determined on your contractual agreement with your employer.
Once this information is added to the calculator, you can view your results.
To the right, there is a smart prompt of your
total options granted
, followed by the
average stock price
. The total options granted refers to the number of stock options you may have based on the number of years you plan to hold the options. In this case, the strike price is the projected stock price. This figure will tell you the average price of your company stock.
Strike prices will vary between companies. It is impossible to predict with certainty what the strike price may be as this will be pre-determined by your employer.
Below the inputs, you can see a quick reference to the monetary value of your stock options. This figure is based on the value of the stocks and the rate that they appreciate at.
In the first result tab, you will find the stock option bar graph. This graph contrasts the value of your stocks over three separate time intervals. This chart may help you decide how long to hold the options. You should consider your vesting period and how long you plan to work for the company.
The next tab is a graph of the stock price, which charts the value of the stock over time. Here you may see how the stock appreciates. You can hold your mouse over any instance to get a pop up of the exact value at that point.
Finally, the last tab is a table summarizing the value of your options at the end of each year. You can expand or contract any of the columns for better viewing. You can also highlight a line by selecting it.
Once you view this information, you should be able to make an informed choice about receiving annual stock options. Stock options can be a reasonable means to supplement your income. It often depends on how long you plan to be with the company. In some cases, you may have to negotiate your contract to more favorable terms.
Remember to bookmark the annual stock option calculator. You can save it to the home screen of your smartphone or tablet to have quick access to this tool. You can return as your company stock appreciates or your employment changes. If you found this page useful, you can promote us on social media using the share feature.