John Olagues & John F. Summa 
Getting Started In Employee Stock Options 

An A to Z guide for understanding employee stock options (ESOs).

In Getting Started In Employee Stock Optionsauthors John Olagues and John Summa provide a full understanding of ESOs and demonstrate how to make the most of them. Page by page this author team, a highly experienced options market maker and a professional trader, share essential information that you’re probably not hearing anywhere else. This book contains the keys to managing and hedging ESO opportunities in addition to important tax and valuation guidance appropriate for the highest executives to the non-officer managers and the newly arrived employee.

* Examines essential ESO issues, including tax consequences, risks, and industry pitfalls

* Written by an experienced pair of stock option experts

* Enables employees and executives to make more informed decisions regarding their stock options grants

Written in a straightforward and accessible style, Getting Started In Employee Stock Options will help protect the value of your options, help you avoid costly mistakes, and allow you to take advantage of certain friendly tax rules. Some of the world’s foremost authorities on options have endorsed Getting Started in Employee Stock Options.

Table of Content

Preface.

Chapter 1: Introduction.

Chapter 2: Preliminary Concepts and Definitions.

Chapter 3: Options Valuation and Basic Concepts.

Chapter 4: Risks of holding ESOs (Unhedged).

Chapter 5: Tax Consequences of ESOs.

Chapter 6: Straddle Rule and Tax Implications of Hedging
ESOs.

Chapter 7: Management of ESOs and Premature Exercises.

Chapter 8: Comparison of Premature Exercises with Early
Withdrawal from IRA.

Chapter 9: Non-Hedging Strategic Choices for Managing Your
ESOs.

Chapter 10: Basic Hedging Strategies Overview.

Chapter 11: Constraints on Hedging: Real and Imagined.

Chapter 12: Premature Exercise: Pros and Cons.

Chapter 13: Putting It All Together – The 7% Solution.

Chapter 14: Does Hedging ESOs Undermine Alignment of
Interests?

Chapter 15: Why Do Companies Want You to Exercise
Prematurely?

Chapter 16: ESO Hedging Case Studies – Google, Yahoo!, and
Apple.

Chapter 17: ESO Valuation Methods.

Chapter 18: Comparing Restricted Stock with Employee Stock
Options.

Chapter 19: Google Semi-Transferable Options.

Chapter 20: New World Options Plan.

Chapter 21: Understanding Executive Abuses I.

Chapter 22: Understanding Executive Abuses II.

Chapter 23: Understanding Executive Abuses III.

Appendix A: ESO Glossary.

Appendix B: IRA Tax Rules for Options.

Appendix C: Did the SEC Encourage Back-Dating and Spring
Loading?

Appendix D: Hedging under 1.1221-2, Straddle Rule 1092 and other
Tax Implications of Hedging ESOs.

About the author

John Olagues is owner of Truth in Options
(www.optionsforemployees.com). Formerly a member of the Pacific
Stock and Options Exchange and the Chicago Board Options Exchange,
Olagues cofounded Options Research, the first analytical service to
provide theoretical options values to market makers and the general
public. For years he was considered one of the leading options
market makers in the world, having created many of the trading and
hedging strategies used today.

John Summa, Ph D, is an author, economist, and founder of
Options Nerd.com. In 2001, Summa coauthored the Wiley title, Options
on Futures: New Trading Strategies. A former fund manager, he
recently launched the ESO educational Web site,
Hedge My Options.com.