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Annual Stock Option Grants

Many companies issue annual stock option grants to their employees. Receiving a stream of stock options over a period of years can be an incredible benefit. Use this calculator to project how much a series of annual stock option grants could be worth to you.

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Definitions

Current stock price
Current stock price. For this calculator, the current stock price is assumed to be the strike price. The strike price is the stock price that your options were issued at. The underlying stock price must exceed the strike price for your options to have any value.

Stock appreciates at
This is the annual rate of return you expect from the stock underlying your options. Thanks to the leveraged nature of your stock options, once the underlying stock value has exceeded your strike price, the value of your options will increase at an accelerated rate. The actual rate of return is largely dependent on the type of investments you select. For example, from December 1999 to December 2009, the average annual compounded rate of return for the S&P 500 was -0.6%, including reinvestment of dividends. From January 1970 to December 2009, the average annual compounded rate of return for the S&P 500, including reinvestment of dividends, was approximately 10.1% (source: www.standardandpoors.com). Since 1970, the highest 12-month return was 61% (June 1982 through June 1983). The lowest 12-month return was -43% (March 2008 to March 2009). Savings accounts at a bank may pay as little as 1% or less but carry significantly lower risk of loss of principal balances.

It is important to remember that these scenarios are hypothetical and that future rates of return can't be predicted with certainty and that investments that pay higher rates of return are generally subject to higher risk and volatility. The actual rate of return on investments can vary widely over time, especially for long-term investments. This includes the potential loss of principal on your investment. It is not possible to invest directly in an index and the compounded rate of return noted above does not reflect sales charges and other fees that funds and/or investment companies may charge.

Annual stock option grant
This is the number of stock options you receive each year. The strike price for each year will be calculated as the projected stock price.

Number of years
The number of years you expect to hold these options. This can be any number from three to twenty-five.

Information and interactive calculators are made available to you as self-help tools for your personal independent use and are not intended to provide investment advice. We can not and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.