Getting Started In Employee Stock Options


Praise for Getting Started In Employee Stock Options

"Anyone who has been or is about to be granted stock options will find this book extremely valuable."
—Blair Hull, Founder of the Hull Group, and current Chairman and CEO of Matlock Capital, LLC

"John Olagues and John Summa have made an important contribution for guiding employees and service providers in managing their employee stock options, written from the perspective of the options trader. The basics of defining the various elements of risk and approaches to managing employee stock options are clearly explained here for the beginner. This book provides practical strategies to be implemented with the guidance of skilled tax, legal, and investment advisors."
—Michael Gray, CPA, author of Secrets of Tax Planning for Employee Stock Options, 2009 Edition

"This book provides a much-needed introduction to practical hedging strategies for employee stock options. Filled with concrete examples and detailed explanations, it reveals the importance of optimal hedging and exercise timing in ESO management."
—Tim S. T. Leung, Assistant Professor, Applied Mathematics and Statistics, Johns Hopkins University

"This is the most comprehensive text I've seen on employee stock option strategies. If you want to understand the alternatives for your options, this is a must-read."
—Chris Murphy, ESO Expert, Credit Suisse

"I can't believe this book has not been written before. Employees and executives have been letting wealth evaporate for years because they did not realize the value of their stock options. Here, the authors educate the employee on the value of their option holdings and give a sound strategy for maximizing profits."
—Tom Mcgourn, CFA, Derivatives Valuation Consultant, Montgomery Investment Technology, Inc.

John Olagues is owner of Truth in Options ( Formerly a member of the Pacific Stock and Options Exchange and the Chicago Board Options Exchange, Olagues cofounded Options Research, the first analytical service to provide theoretical options values to market makers and the general public. For years he was considered one of the leading options market makers in the world, having created many of the trading and hedging strategies used today.

John Summa, PhD, is an author, economist, and founder of In 2001, Summa coauthored the Wiley title, Options on Futures: New Trading Strategies. A former fund manager, he recently launched the ESO educational Web site,


Chapter 1: Introduction.

Chapter 2: Preliminary Concepts and Definitions.

Chapter 3: Options Valuation and Basic Concepts.

Chapter 4: Risks of holding ESOs (Unhedged).

Chapter 5: Tax Consequences of ESOs.

Chapter 6: Straddle Rule and Tax Implications of Hedging ESOs.

Chapter 7: Management of ESOs and Premature Exercises.

Chapter 8: Comparison of Premature Exercises with Early Withdrawal from IRA.

Chapter 9: Non-Hedging Strategic Choices for Managing Your ESOs.

Chapter 10: Basic Hedging Strategies Overview.

Chapter 11: Constraints on Hedging: Real and Imagined.

Chapter 12: Premature Exercise: Pros and Cons.

Chapter 13: Putting It All Together - The 7% Solution.

Chapter 14: Does Hedging ESOs Undermine Alignment of Interests?

Chapter 15: Why Do Companies Want You to Exercise Prematurely?

Chapter 16: ESO Hedging Case Studies - Google, Yahoo!, and Apple.

Chapter 17: ESO Valuation Methods.

Chapter 18: Comparing Restricted Stock with Employee Stock Options.

Chapter 19: Google Semi-Transferable Options.

Chapter 20: New World Options Plan.

Chapter 21: Understanding Executive Abuses I.

Chapter 22: Understanding Executive Abuses II.

Chapter 23: Understanding Executive Abuses III.

Appendix A: ESO Glossary.

Appendix B: IRA Tax Rules for Options.

Appendix C: Did the SEC Encourage Back-Dating and Spring Loading?

Appendix D: Hedging under 1.1221-2, Straddle Rule 1092 and other Tax Implications of Hedging ESOs.