Stock Option Calculator
Receiving options for your company’s stock can be an incredible benefit. Even after a few years of moderate growth, stock options can produce a handsome return. Use this calculator to determine the value of your stock options for the next one to twenty-five years.
Current stock price
Current stock price. If this price is above your option strike price, you are already in the money. If it is currently below the option strike price, your options will not have any value until it exceeds the strike price.
This is the annual rate of return you expect from the stock underlying your options. Thanks to the leveraged nature of your stock options, once the underlying stock value has exceeded your strike price, the value of your options will increase at an accelerated rate. The actual rate of return is largely dependent on the type of investments you select. The S&P 500 for the ten years ending on December 31st, 2011 had an annual compounded rate of return of 2.92%, including reinvestment of dividends. From January 1970 through the end of 2011, the average annual compounded rate of return for the S&P 500, including reinvestment of dividends, was approximately 10.01% (source: www.standardandpoors.com). Since 1970, the highest 12-month return was 61% (June 1982 through June 1983). The lowest 12-month return was -43% (March 2008 to March 2009). Savings accounts at a bank may pay as little as 0.25% or less but carry significantly lower risk of loss of principal balances.
It is important to remember that these scenarios are hypothetical and that future rates of return can’t be predicted with certainty and that investments that pay higher rates of return are generally subject to higher risk and volatility. The actual rate of return on investments can vary widely over time, especially for long-term investments. This includes the potential loss of principal on your investment. It is not possible to invest directly in an index and the compounded rate of return noted above does not reflect sales charges and other fees that funds and/or investment companies may charge.
Number of options
This is the number of stock options you were granted.
The strike price is the stock price that your options were issued at. The underlying stock price must exceed the strike price for your options to have any value.
Number of years
The number of years you expect to hold these options. This can be any number from one to twenty-five.
Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.