Employee Stock Options – Thousands of (Potential) $’s in Value

As I discussed previously in another post, part of my compensation package at work includes receiving a generous amount of stock options that, if successful, will mean a great deal of money to me. I have not, and will not, include this as a component of my portfolio or net worth until I at least pass the vesting period.

I have stock options with two vesting schedules. The first group of options I have received were on a 1/3 vesting schedule. This means that 1/3 of my options will vest after year 1, the next 1/3 after year 2, and then the rest after year 3. The options that I just received, and all subsequent grants, are on a 3 year vesting schedule; all options will vest after 3 years.

The thing with stock options is you never really know how they are going to do. The stock price can go up and it can go down and depending on the strike price, this will dictate how much money you will make off of them. If things continue to go how they have for my company’s stock, then I could potentially be sitting on a couple of hundred thousand dollars. If it doesn’t then I am either up nothing or something smaller than what I had hoped for.

What is my point? Once my stock options vest, I may report them on my investment page as a component to my portfolio. I think this may be important simply because they may be a big chunk of my investment worth and I will need to ensure that I balance them out so that all my wealth is not in these options (a la Enron). I will need to develop a sell plan for them that maximizes value while minimizing risk and taxes. I only hope I need to worry about making these decision.