Do you have any non-qualified stock options (NSOs) granted to you by your employer? NSOs are a common equity compensation feature provided to management-level employees as part of a compensation package. They give you the opportunity to potentially profit from the price increase in your employer’s stock. An employee stock option gives you the right to purchase a specific number of shares of your company’s stock at a specific price – the grant or strike price – within a specific time period. The grant price is typically the market value of the stock at the time your company granted you the options. Here are some of the essential things you ought to know about your NSOs.
Recently I heard a story from a 67-year old woman who had gotten divorced after twenty years of marriage. She had raised her daughter at home while she was younger and she didn't get much at all from the divorce. She is now collecting about $900 per month from Social Security income and working part-time to get by while sharing an apartment with others. She is fearful about her financial future because she has never managed money before and it's hard for her to find a job at her age. This month, I also heard another story about a woman who confided to her granddaughter in college that she had stayed in an abusive marriage for many years because she didn't have any control of money. Later, this woman's death resulted from falling down the stairs and was later confirmed not to be an accident. In fact, her abusive husband pushed her down the stairs. Staying because of money had literally cost her her life.
Imagine that you decide to go to see a new movie. You hand the cashier at the counter a twenty-dollar bill. She gives you back a ten-dollar bill and a ten-dollar ticket. But when you get to the theater door, you realize you don't know where your ticket is. It's just lost. Do you think you'd pay ten dollars for a new ticket, or would you just head home? If you're like most people, you might be tempted to head home. In fact, when the psychologists Kahneman and Tversky presented this problem to college students, fifty-four percent of people said they'd probably just head back home.
A recent study by DALBAR, a financial research firm, has confirmed that investors who try to time the stock market often dive into the market at the top and flee at the bottom. This fact has actually caused investor results to significantly lag the broader markets over the long haul.