It is becoming increasingly popular for companies to award stock options as part of employee compensation, and senior executives, in particular, can accumulate large positions in company stock options. Indeed, many senior executives may find that a significant portion of their wealth is tied up in options, which may pose more risk than they are willing to bear.
A stock option gives you the right to purchase a certain number of shares in a company at a fixed price for a specified period. Most options are either incentive stock options (ISO) or nonqualified stock options (NQSO). Incentive options that meet certain tax requirements entitle the holder to favorable tax treatment. For example,the option spread may be taxed as capital gain rather than as ordinary income. Such options can only be held by company employees. NQSOs are treated as ordinary income at the time of exercise.
Many factors can influence the value of your options, and making the decision if and when to exercise can be difficult. Your PNC financial advisor can determine the value of your options and discuss a broad range of alternatives for planning your option strategy and reducing your exposure to concentrated positions in one company's stock.
At PNC Wealth Management, we simplify a complicated process and help you extract the maximum value from your options.
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