Option spread strategies; trading up, down, and sideways markets.
Since the market becomes very erratic, some orders are executed for small quantities and others are not fully executed, this leads to transaction prices in the underlying asset markets which do not correspond to the
option spread. The quoted
option spread does not correspond to any transaction in the market place.
A more efficient approach would be to prohibit exercise of stock option awards unless the executive holds more than the equivalent number of shares in the
option spread (on an after-tax basis), thus encouraging executives to hold stock options which will be more volatile in response to stock price movements.
Preliminary analysis reveals that many insurers can hedge effectively using call
option spread contracts based on a statewide loss index, and that even small insurers can make effective use of index options.
However, at the time of exercise, you are required to pay the income tax on the
option spread, just as you would pay the tax if you had not transferred the options but had simply exercised them in your own name.
Size
option spread in Procter and Gamble as a bullish position is adjusted.
The risk is limited to the combined cost of both options plus the commissions and fees (commissions are charged on both "legs" of the
option spread).
A recalculation must be determined as of the valuation date used in the initial calculation, using the same interest rate and
option spread, but the procedure allows the use of a different method from that used in the original calculations, as long as both methods are consistent with GAAP.
In 2006,W would recognize ordinary income in the amount of the
option spread. In 2011, she would recognize ordinary income in the amount of the lump sum received from the deferred compensation plans.
Size four-way
option spread in EBAY as a bullish position is adjusted.
Because the employees' ISO stock was immediately cashed out as part of the LBO, they suffered "disqualifying dispositions" of their stock, causing them to be taxed on the
option spread as ordinary income rather than as capital gains (which would have been the case had they held their stock for one to two years after exercise of the option).
1.83-3(j)(2), Example (3), it would appear that the insider is taxed on the
option spread on June 2, 1991.
