Few questions about stock options

Few questions about stock options?

Can i cash in options before they expire?

can i cash in an option after they expire?

or do i have to cash in on the expiration date?

Other Answers:

1. You can not cash options after they are expired. Also, if you received options from a company you work for you need to make sure that you are VESTED (i.e., usually non-qualified or incentive options are not given to you all at once, you take ownership over 4 years).

EDIT NOTE: "Cashing in" stock options is a two-step process. You must first convert the option to actual stock, and then sell it. You CAN convert the option to stock and keep the stock...

2. Once you are vested, you can normally convert to stock. However note that you owe tax immediately on the difference in value between the option price and the current price of the stock, if the company is already publicly traded. If the company is private, you need to estimate the market valuation of the company. This is the dreaded "Alternative Minimum Tax" or AMT that a lot of ".com bust" people talk about, i.e., they paid perhaps 10 cents for each stock shares, but it was worth $200/share when they converted the options to stock. Then, the price of the stock collapsed to $1/share the same year, but they still needed to pay tax on a profit of $199.90/share!

3. If your stock options were for a private company not publicly traded on the stock market, frequently you must hold onto the stock for a minimum period of time the stock options grant, perhaps 2 years, so you must find this out.

4. For tax, you need to find out what type of stock options they are, are they incentive, non-qualified. Usually, you are given non-qualified stock options and have to pay tax. For regular tax purposes, incentive stock options have the advantage that no income is reported when the option is exercised and, if certain requirements are met, the entire gain when the stock is sold is taxed as long-term capital gains.

Hope this helps!

You can sell an option at any time before it expires,
but its worth depends on the current market value of
the security. It can be worthless.
On the expiration date you exercise it or you lose it.
Unless you REALLY know what you're doing,
don't mess with options.

Irv S. is totally correct. Consider yourself about 1-2 years away from trading Options... 2 -4 years away from Option Strategies.

Check out;
http://www.redoption.com/education_optio...