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Stock options give employees the option to buy stock at a predetermined price. Usually, when a company grants stock options, the predetermined price refers to a future price, and the future price is usually higher than the current price. For example, if your stock is trading at around $20/share, you might get 1000 options with a strike price of $22/share. No one would exercise their options (or buy this stock) right away, because why would you want to pay $22 for the stock when you can get it for $20? But, if the stock goes up to $30, then you get a good deal when you exercise your options: you get to buy those same shares at a discount, for $22/share. In the stock options backdating scandal, companies looked at their stocks' historical prices, found the low point, and granted options based on that date. Since the stock had gone up since then (i.e., the stock is no longer at the low point), this backdating automatically guaranteed these employees made money. In other words, say that the company stock is trading around $20 today and has been at that level for a while, but a year ago it dropped--just for a day--to $15 before rising back to $20 the next day. If your company illegally backdated stock options, it would grant options today for $15, but backdate them to make it look like the options were granted before the temporary drop. That way, employees could take advantage of the stocks' gain from $15 to $20. This backdating, while profitable, is illegal because options aren't meant to be a guarantee of profits but an incentive to work hard to improve the company and, hence, its stock price. Backdating is cheating, making it look like stock options were granted in the past by changing the date.
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Where may I learn about backdating stock options?
Backdating is a very trick practice that if done intentionally and be considered fraud by the SEC. Backdating is issuing options contract on a later date than what listed. This is not itself illegal but the intent to underlay the stock option prices is.
What does the term backdating relate to?
The term backdating is usually used in the financial industry, when referring to stock options. It is the practice of altering the date a stock option was granted, either an earlier or a later date. It is a legal method of showing a lower price of a stock.
How do I backdate my stock options for tax purposes?
Stock Options backdating is a very controversial subject, as some feel that it should be illegal. However, for tax purposes, one may issue stock options later than the date listed on the options but may not do so due to low underlying stock prices.
What are some good articles or websites to research the stock options backdating scandal?
The stock option back dating scandal was widely covered by mainstream media like CNBC, FoxNews, Reuters and major business journals like the Wall Street Journal and others. All these will explain how the stock options were being granted after the fact and then being subsequently back dated for the lowest stock price.
How Backdating Stock Options Works?
Backdating stock options is a process in which companies reward their employees by allowing them to change the issue date of stock options in order to increase profit. This was a commonly accepted practice in the corporate world until the Sarbanes-Oxley act was passed as part of Wall Street reform. While it can still be done to some extent, it is much more difficult to do it successfully. Companies often give stock options to employees as a form of employee bonus. After working for the company for a certain amount of time, employees may be entitled to stock options as part of their benefits package. An option contract gives the employee the right to get a certain number of shares at a specific price. The price that they can exercise the contract on is based on the date of the option contract. The process of backdating stock options involves changing the date of the options contract to a date in the past so as to take advantage of a lower stock price in the market. Then when the contract is granted, the employee immediately have a profit because the stock is already worth more. Before Sarbanes-Oxley was passed, companies could backdate options up to two months in the past. This allowed companies to simply find a date within the last two months in which the stock price was lower than what it is when the options were granted. After Sarbanes-Oxley, the company only has a two-day window. When stock options are granted to employees, these options have to be reported to the Securities and Exchange Commission. Since they must now be reported within two days of issue, there is not as much room for companies to pick and choose dates based on the stock price. Once an option contract is granted, the employee gets to choose whether he wants to exercise it immediately or whether he wants to hang onto it. If the employee decides not to exercise it immediately, he has the option of exercising it at a later date when the price of the stock has increased. This gives the employee some flexibility in taking his company perk.
What is the purpose of free stock options?
Free stock options are often in the form of employee stock options, where an employee is offered stock in the company as a form of non-monetary compensation.
Are there several ameritrade stock options?
There are many ameritrade stock options. They will provide you with their various stock options through there site on the internet. Visit it for more information.
Where can one find information on stock trade options?
One can find information on stock trade options by going to a local stock broker. They will have great advice on everything about the stock trade options.
What are the UK's stock options?
To learn more about where UK stock options are you will have to check UK stock options on Wikipedia to see where and what they are so you can find out more information on where to find them
What is Exercise of Stock Options?
Stock options is when you have a right to buy (or sell, but most commonly buy) a stock at a predetermined price.Exercising a stock option means that you use it: You buy the stocks at the agreed price, and the options expire as you spent them on the stock purchase.
Where can you go to get stock options explained to you?
There are a number of sites where one can get stock options explained. One of these options includes videos that are available on YouTube under the topic of 'Explaining Stock Options Trading'. Another option is 'The Options Guide' website.
Where can I find advice on best stock options?
There are a lot of people that need advice with stock options. There are a few options you can either chat with an online representative or you can get in contact with a stock adviser.
