I woke up to another surprise from eTrade this morning. In addition to the 128 shares of restricted stock options they've been teasing me with for the past few weeks, I also now have 383 shares of regular stock options vested. Both batches vested this morning.
Regular stock options are issued with a strike price. The strike price is somewhat tethered to the price the shares were trading at the day you joined the company. In my observation, they operate on the principle that your contribution to the company over time can help increase its value. Vesting schedules are laid out in a job offer to encourage retention.
Once options have vested, you can sell them at nearly any time (before you leave the company) and profit on the difference. It's taxed as a capital gain. If they do not increase in value, you simply do not exercise them and walk away from them without realizing a loss. There is also a small fee associated with exercising them.
In 1997, I was issued a significant number of regular stock options in a relatively obscure tech company. They vested three years later, nearing the height of the Nasdaq and dot-com madness. My strategy was simply this one: it's essentially free money, exercise as they vest, sell immediately. I realized a capital gain of approximately $250 000.
My former colleagues who held a similar number of options to their peak made $1 000 000. My former colleagues who held past the peak made $0. It's a best guess, gut feel, risk threshold, comfort level kind of decision you usually don't get to make twice.
This time I have vested shares in Intel, and right now they are trading pretty close to the strike price. I'll let them sit for now. I'm not ready to sell the restricted stock options either.
I looked up the strike price: $20.30
