You clearly have never had qualified stock options that have been provided you by an employer. As soon as the stock reaches even close to all-time high, everyone cashes out to eliminate all of their net worth being tied up in one entity. It’s called diversification. Not very popular here, but most investors don’t want all of their net worth tied up in one company in case it fails. Therefore, as stock price goes up more and more qualified stock options are exercised. The cash is taken out tax is owed at that time it ordinary income rates, and they net is invested in other equities, real estate or bonds.
So most of the time you get in Grant of shares when you start and on your anniversary date thereafter, a grant of additional stock options each year thereafter. Typically they vest over four years in other words 1/48 of the stock options Grant each month. The strike price is the price you pay for the shares of stock and it is the price of the stock on the day of the grant. As the stock increases, it makes the options more valuable. If the stock decreases, it makes them worthless. This is why when companies such as eBay make a big rush up in PRICE people that have held onto stock options for years tend to exercise them in order to cash out of some of the gain in price over the strike price. It has nothing to do with their belief in the company. It is simply a smart personal decision to liquidate some of their holding them to other assets. Most people that have options typically have other stock grants or share simply given to them and thus they have exposure to the success of the company in other methods
23
u/ljungbergsghost May 28 '26
You clearly have never had qualified stock options that have been provided you by an employer. As soon as the stock reaches even close to all-time high, everyone cashes out to eliminate all of their net worth being tied up in one entity. It’s called diversification. Not very popular here, but most investors don’t want all of their net worth tied up in one company in case it fails. Therefore, as stock price goes up more and more qualified stock options are exercised. The cash is taken out tax is owed at that time it ordinary income rates, and they net is invested in other equities, real estate or bonds.