strategies; trading up, down, and sideways markets.
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.
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.
Notable three-way option spread
in McDermott ahead of earnings next week.
In 2006,W would recognize ordinary income in the amount of the option spread
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).
83-3(j)(2), Example (3), it would appear that the insider is taxed on the option spread
on June 2, 1991.