Stock Options Vesting Soon

Written by The Dividend Guy on December 28, 2006

I have been grappling over the past few weeks on how to report some stock option that will vest as of January 1, 2007. When I joined my current company, I received some options that vest in 1/3, 1/3, 1/3 increments. The first third is set to vest. Although these have been going in and out of the money for about a half year now, I believe that the prospects for my company are good and I could be sitting on some gains in the future.

The question I have is whether to include this in my investment new worth or not. I have been looking at it in a couple of ways. The first, is what I want to do with the money. My first inclination is to use the proceeds to pay down my mortgage. Although this is not directly investment related, it does do a lot to increase my net worth. The second is to take these gains and invest it in more dividend paying investments. I know that I can earn a higher rate of return on my investments - higher than the mortgage rate I am paying.

At this time I am not sure what I will do - but I am leaning towards paying down the mortgage. The potentially could be enough there at some point to pay off a huge chunk leaving me with a very small mortgage balance and being so much closer to having the extra money on a monthly basis to invest (because I would have no more mortgage payment). I will let you know when I get there.


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3 Comments so far

  1. Big Cajun Man December 29, 2006 7:52 pm

    Do NOT count options as anything other than potential growth, do not plan around them, any income from them are WINDFALL, and should be treated as such. WHEN you get the money from them worry about what to do with them, but do not rely on them, or you will be disappointed.

    I have seen two marriages destroyed by foolish reliance on options and their values, so I beg you to treat these as “manna from heaven” if they pay out. –C8j

  2. The Dividend Guy December 31, 2006 11:29 am

    That is good advice Cajun - I am not banking on them in anyway - simply hoping that I am able to pay my house off!! If it happens great, if not then I just continue to invest and pay down my mortgage the old fashioned way!

    TDG

  3. mark January 4, 2007 5:43 pm

    Wow. Congratulations on (the possibility) of a nice options payout that would erase a chunk of your mortgage. I have neither the possibility of options nor a mortgage. Living in L.A., houses are still way out of my price range.

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