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How do I take advantage of employee stock options?

Many companies offer stock options as an incentive for their valuable employees as a type of deferred compensation. While it’s great to work for a company that offers such incentives, it can be difficult trying to understand the ins and outs of these investment alternatives.

However, it doesn’t have to be. Your Raymond James financial advisor will listen to your needs and help you understand your choices. He or she will make sure you are aware of how your stock options work, how you can exercise them and other factors that may determine if they are a good investment for you.

How do stock options work?

Employee stock options are rights your employer gives you to buy a specific number of shares of your company’s stock during a time and at a price your employer specifies.

The price the company sets on the stock is discounted and is usually the market price of the stock at the time you are given the options.

Since those options cannot be exercised for some time, your employer hopes that the price of the shares will go up so that you can sell them later at a higher market price and make a profit. If your company files for bankruptcy or doesn’t perform well, the share prices could fall along with your potential for profit.

Companies offer stock options to persuade potential employees to accept jobs and motivate them to succeed.

Exercising your stock options

Once your options date comes around, you can exercise your right to buy shares of your company’s stock at the price specified in your agreement. You pay the exercise cost to your company and they give you the stock. You can keep the stock or sell it, unless it is restricted until a specified date or restricted by law.

What’s more, if you do sell your stock, you’ll have to pay taxes on the difference between the market value of the stock you receive and the exercise cost you pay, depending on the type of stock option plan offered to you.

Since the procedure for exercising employee stock options varies from company to company, you should discuss the type of plan you have with your Raymond James financial advisor.

Discuss your options with someone who will listen

Deciding whether or not to take advantage of employee stock options can be a complicated decision. Many companies don’t have a brokerage firm available to explain the intricacies of exercising stock options, or the resources needed to make the purchase.

Your financial advisor will listen to your financials needs and discuss your employee stock options with you to help you make a decision you are comfortable with. And if you decide to exercise your options, he or she will help you with the necessary paperwork and work with your company to expedite the transaction.

For more information about employee stock options, please contact your Raymond James financial advisor or use the Office Locator to find our office(s) nearest you today.