Stock Option Calculator
This Stock Option Calculator is designed to help users predict the future value of their stock options. To use this tool you will need to enter the current stock price of your stock option, the number of options you currently hold, the number of years you plan on holding them, the strike price and the stock appreciation rate. After entering this information you can select to graph the results based on your stock options' value by year or your stock options final value.
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Stock Option Inputs:
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Stock Options Final Year Values
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Value of Options by Year
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Current stock price
Current stock price. If this price is above your option strike price, you are already in the money. If it is currently below the option strike price, your options will not have any value until it exceeds the strike price.
This is the annual rate of return you expect from the stock underlying your options. Thanks to the leveraged nature of your stock options, once the underlying stock value has exceeded your strike price, the value of your options will increase at an accelerated rate. The actual rate of return is largely dependent on the types of investments you select. The Standard & Poor's 500® (S&P 500®) for the 10 years ending December 31st 2018, had an annual compounded rate of return of 12.1%, including reinvestment of dividends. From January 1, 1970 to December 31st 2018, the average annual compounded rate of return for the S&P 500®, including reinvestment of dividends, was approximately 10.2% (source: www.standardandpoors.com). Since 1970, the highest 12-month return was 61% (June 1982 through June 1983). The lowest 12-month return was -43% (March 2008 to March 2009). Savings accounts at a financial institution may pay as little as 0.25% or less but carry significantly lower risk of loss of principal balances.
It is important to remember that these scenarios are hypothetical and that future rates of return can't be predicted with certainty and that investments that pay higher rates of return are generally subject to higher risk and volatility. The actual rate of return on investments can vary widely over time, especially for long-term investments. This includes the potential loss of principal on your investment. It is not possible to invest directly in an index and the compounded rate of return noted above does not reflect sales charges and other fees that investment funds and/or investment companies may charge.
Number of options
This is the number of stock options you were granted.
The strike price is the stock price that your options were issued at. The underlying stock price must exceed the strike price for your options to have any value.
Number of years
The number of years you expect to hold these options. This can be any number from one to twenty-five.
Stock Option Calculator Overview
There are several different types of compensation an employee can receive from his or her employer. One type of compensation is the stock option. Stock options are usually given to employees once a year based on their seniority, position and company policy. Employers like this type of compensation because it really doesn't cost them anything until the employee retires or leaves the company.
As an employee you may have stock options integrated into your annual salary already. If this is the case, you may feel that they really aren't doing you much good right now. However, when you are ready to cash in these options you will reap the benefits of this compensation type. If you are interested in learning how much your stock options will be worth next year or 20 years from now you can use our Stock Option Calculator.
How to Use the Stock Option Calculator
Here's how it works:
- First of all, input the current price of your stock options either by using the slider or typing directly into the box next to it
- Next, enter the percentage by which you expect the stock to appreciate – although this will be an estimate, you may want to base it on previous years’ performance and current trends
- Input the number of stock options you currently hold
- Add the strike price – this is the amount that your stocks were sold to you at, rather than their current value
- Finally, estimate the number of years you expect to hold onto your stock options before selling them, and click "View Report" to see your results.
Who is this Calculator for?
This calculator is most useful if you:
- Work for a company which offers stock options as a compensation or bonus
- Are considering cashing out your stock options and would like to know how much you stand to gain, or lose, by doing so
- Want to check on the total cash value of your stock options now and in the future.
When is a good time to cash out my stock options?
This is a many-faceted question with no single correct answer – if there was one, there would be no stockbrokers in the world and every trader would be a millionaire! As a rule of thumb, having stock options in the company you work for is beneficial to everyone; you typically get more than you would if it was a straight cash bonus, and the company gets an employee with a vested interest in the success of their business.
With that said, if you need the money now, cashing out is a perfectly viable and acceptable option. Similarly, if you feel that the company is stagnating – for example if they are refusing to hire on new staff or take necessary long-term measures such as improving infrastructure, that may be a signal to you that it is time to take the money. Conversely, if the company is aggressively expanding, and hiring lots of new people, this could be a sign of good times in the business.
The bottom line is that with stock options, you are always taking a bit of a gamble. If you cash out, you can spend the money on whatever you like, and no-one can take the money away from you for reasons beyond your control (except perhaps the IRS). However, holding onto your stock options until just the right moment can pay handsome dividends further down the line.
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