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Re: Jagman post# 7243

Wednesday, 02/16/2005 12:03:46 PM

Wednesday, February 16, 2005 12:03:46 PM

Post# of 53980
Interesting theory, but what many here often forget is that the shares are paid for when the options are exercised; the individual who received the option exercises it by paying for the stock, and the company receives the money.

The exercise price that the individual paid becomes their cost basis of these shares. If these shares are later sold at a price above the exercise price, there is a capital gain. If they are later sold at a price below the exercise price, there is a capital loss.

As I said before, most would usually exercise the option, i.e. pay for the shares, because they anticipate the price will later be higher than the price at which the option was exercised.

And hence, they are generally anticipating capital gains.







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