In this episode, we are going to deal with one simple question. If your company offers you non-qualified stock options, should you accept them? The answer...YES! A big fat resounding, yes! Now if I stop here, this will be the shortest episode I've ever done. Honestly, you could stop here, but I need to provide some data to back this position up. Some of this will be a repeat from other episodes, but it is too important not to cover.
You will want to hear this episode if you are interested in...
A few things to note about non-qualified stock options
A non-qualified stock option is simply an agreement that provides terms under which you can buy a specific number of shares at a set price during a determined time frame. The details are included in your employer stock plan document, be sure to get a copy of it so you know the rules unique to your employer. When you are granted stock options, you have the right to purchase a set number of shares at a specific price during a fixed timeframe. The specific price is referred to as the exercise, grant, or strike price. When you decide to purchase the shares, you have exercised your options, until that point, when you exercise the options, there are no taxes for you. So if you've never exercised or so if you never exercise them, there is no worry about taxes.
The first reason to accept company stock options if they're offered to you is they are a way for you to directly participate and hopefully benefit from your employer's success, assuming the price of the stock goes up. If your company stock options go down before you exercise, this has no impact on you. Another reason to always accept your company's stock options is that there are no taxes with stock options until you exercise them.
Why do people value equity compensation?
Why do people value equity compensation so much? The most important reason according to survey respondents is...it helps them to build wealth "significantly build wealth" actually. The company stock options provide you a direct and no-risk way to participate in and hopefully significantly build your own wealth. But the most important reason to accept company stock options if offered by your employer, but you may have guessed this already, is because there is no financial risk to you until you exercise the options.
This week’s FLASHBACK: Christmas in July
Today’s flashback is less of a flashback and more of a question. When did you first learn about the concept of Christmas in July? Or is this the first time you've heard this term? For me, it was the summer I worked at Cedar Point. This would have been 1990. There was an after-hours party for the workers in our section of the park. We held it at a local park away from Cedar Point and the theme was Christmas in July. I just remember thinking what the heck is Christmas in July. When I went to the party, it was mostly food and beverages. Honestly, it just seemed like an excuse to have a party with a theme associated with it.