Dave:
Thanks for the comment. I didn't realize that.
The terms "exercise price" and "strike price" are used interchangeably for CBOE options. Since the employee stock options are typically issued at the money, the price on the date of issue will also be the strike (or exercise) price.
But I have added a statement in the primer that the two terms are synonymous in some cases.
Your use of the term "exercise" price confuses me. For CBOE options, this is called a "strike" price. Exercise price is what you are calling a "grant" price.
I guess ESO options overload the terminology?
Many people believe high tech stocks are volatile because technology is hard to understand or predict. I disagree. They are volatility because executives want cheap options. Executives of high tech companies are incentivized to create volatility in their stock prices so that they can take advantage of options back dating. The process is simple. Release bad news, make the stock go down, grant yourself options. Release good news, make the stock go up, exercise your options. Think about it. This is free money. If you were awarding yourself options, why not create volatility? If Microsoft stock stayed at the same price all the time, then how would a Microsoft executive make money?
High Tech Executives Create Volatility In Their Stock to Enable Options BackDating
Very helpful article - thank you.
Commenting by HaloScan
