In our prior blogs on the relationship between this famous Kenny Roger’s song and the P&G stock option program, we have examined how trying to decide when to exercise a particular P&G stock option grant is somewhat like trying to know when to “hold ‘em” and know when to “fold ‘em.” Nobody wants to leave a lot of money sitting on the table but nobody wants to lose whatever money they’ve already “won.”
Today we’ll introduce a mathematically-based methodology for analyzing our example grant and think through a better risk-adjusted metric for discussing this example grant series. It’s one of the metrics we use in “The Stock Options Analyzer” TM that gives us the ability to guide our clients in arriving at wiser and more appropriate conclusions when it comes to deciding when to exercise some or all of their stock option grants for any particular series of options.
So, the big question for most clients is still - “When should I exercise my stock options?” As we mentioned in prior blogs, we use The Stock Options AnalyzerTM with our clients to help answer this question. Once a client understands the value of their option grant at today’s price and has a better appreciation for the inherent risks and rewards of continuing to hold a stock option grant instead of exercising today, we utilize software that specializes in employee stock options to analyze several metrics in order to come up with a decision framework and timeframe for each stock option grant that a client holds.
Having dealt with P&G stock options for almost three decades, the number one question we get from nearly every P&G corporate executive is when to exercise their stock options. Obviously, if we knew the exact best time to do so for every grant, we would be on our way to Las Vegas to try our expertise at even more lucrative endeavors.
