CL King

Uncovering Hidden Investment Opportunities Since 1972

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The Benefits Of A Good Stock Option Plan

Stock option plan provisions can deliver tremendous benefits for employers seeking to employ a quality staff, and to employees who are looking for a more secure future for themselves and their families. Stock option plan systems are becoming more and more popular; this has become an inevitable consequence since their introduction some years ago. As companies start to witness competition when doing quality personnel recruitment based on the incentives they find themselves capable of offering, they are certain to attempt to implement their own systems that are similar to their rivals to remain competitive. The securing of stock incentives has become one of the most highly desired of all benefits sought after by people looking for steady long term work.
A stock plan is rapidly becoming indispensable for many industries, where personnel performance is entirely dependent on the ability to recruit quality personnel. It is easy for the employer to implement such plans without taking any unnecessary risks, since the share price of the company stock will only go up dramatically on the back of good productivity of the stock plan owners, the employees. Should the company not be doing well and the stock price drops, the shares will remain in the employees hands, unconverted into cash.
The employee stock plan can be considered an incentive that can be put into effect with very small risk. However, it can result in an increase in the value of the stock option plan a company can offer its employees without having to spend any money upfront. This kind of incentive is very advantageous for start up companies, because those companies would encounter great difficulty in raising large sums of money at the startup phase of the life of the company. By making an incentive payment due at a deferred date in the future, a company can take advantage of the benefits now and can wait till later on in its life to pay for it.
Stock option plans can wind up being very profitable for an employee, and provide them a variety of beneficial choices to choose from. Quite frequently, stock options are often thought of as just a safe vehicle to get involved in the stock market, with the opportunity to purchase shares of stock in the company they work for without regard to how high the stock climbs. Of course, this is a usual way to benefit from stock options, but it is not the only way. Someone that expects to use their stock option plan for the achievement of short term gains will always have the problem of stock market uncertainty to deal with.
A much more prudent way to utilize your employee stock purchase plan would be to think of it as an advantageous way to get involved in the stock market. Rather than just selling the stock at a point in time when the stock has risen substantially, a stop loss can be set at a price one would consider selling at should the price fall. By taking this action, a guarantee will be in place providing the opportunity to sell shares at that predetermined price, while at the same time giving the owner an opportunity of gaining from a further rise of the share price in the future. Should the stop loss placed on the stock fail to be hit, there will be no limitations placed on how far the stock can go with a subsequent benefit from the rise. By employing this strategy, someone would be in a position to gain the maximum potential benefit from owning the stock as the stock rises, no matter how far it rises. This strategy will get someone the most out of their stock option plan.
C.L. King & Associates is a full-service investment bank and self-clearing broker-dealer founded in 1972. We provide investment banking, equity research, sales and trading, and investor services to corporations and institutions.
We offer professional assistance and tailored option exercise programs for your incentive stock options, non-qualified stock options and stock options granted to affiliates. C.L. King will create a customized plan to coordinate the tracking, financing and exercising of stock options. We will tailor our procedures to meet your needs and ensure that you receive same-day notification of affiliate transactions for Form 4 reporting purposes. In general, options can be exercised as follows:
  • Same-day sale, where no cash outlay is necessary
  • Cash exercise, where an employee actually pays both costs and taxes
  • Partial same day sale, where an employee sells just enough stock to cover the option cost and taxes and then exercises the remaining options in order to hold the underlying stock.

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