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CarMax Inc. Message Board

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  • jimmiller735 jimmiller735 Dec 29, 2005 11:39 AM Flag


    Shows how much you know. Exercising an option just means buying the stock at the option strike price. If the guy decides to then sell the stock to pay off his vacation home,that's a separate decision and separate transaction.

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    • Yes Jim you are correct....although by far the majority of Option transactions include a Buy and a Sell.

      • 1 Reply to a_real_car_guy
      • To understand the reasons for a sale of stock obtained through options you have to know the type of option (Non-Qualified ot Incentive), and, if it's an incentive stock option, is the company providing a cashless exercise for the option. There are tax laws around options that often determine if there will be a sale of stock. I think the options in questions are Incentive Stock Options (ISO),so no tax is due on exercise, although he might get hit with the AMT. In any event his new options don't vest for between 1 and 4 years so tax issues are out a ways.

        My personal experience with stock options didn't go all that well. Almost from the time of the NQSO grant the options were under water so deep that the Glomar Explorer couldn't find them. Management kept repricing the exercise price downward, but couldn't keep up with market collapse.

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