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I am curious whether there are standardized loans (kind of like margin loans) that are issued to purchase employee stock options.

E.g. let's say I have little or no cash available but have 10,000 options strike price $1. The company is publicly traded, so the asset is liquid immediately (i.e. better collateral). In order for me to take advantage of the options, I would need $10,000 + the tax withholdings and all the other costs. But I would be able to sell the shares immediately.

I would think this would be a loan of little or no risk. In the above scenario, are there common solutions in the financial markets to allow a low cash option holder take advantage of the opportunity? Better yet, do brokerages nowadays offer all-in-one transactions to buy the options and sell the shares for you all in one strike so that you don't have to do multiple transactions from multiple banks/brokerages?

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What you want is a cashless transaction. It's part of the normal process. My employer gives me 1000 options at $1, I never need to come up with the money, the shares are bought and sold in one set of transactions, and if the stock is worth $10, I see $9000 less tax withholding, hit the account. No need for me to come up with that $1000.

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    so I should ask the employer whether they offer a cashless transaction, no ? or do they pretty much all do ? – amphibient Jun 2 '14 at 20:42
  • Best to have the conversation, but what I suggested is more common than not. In the dot com boom, young people had options worth millions, and this was the only way to take the profit, not like they had any cash yet. – JTP - Apologise to Monica Jun 2 '14 at 20:44

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