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How to (Always) Know What Your Stock Options Are Worth

As hugely popular as stock options have become in recent years as a means of drawing top talent to new companies, they also remain one of the least understood facets of business.

According to a 2010 National Opinion Research Center survey, 56 percent of employees in computer industries held stock options in their company, and nearly a quarter of all employees working for companies with stock held some equity. Yet another recent survey showed that 39 percent of employees with stock options say they know little or nothing about their own equity, or the tax implications that come with them.

The truth is, by and large, most people have little idea what their options are worth, how and when they should exercise those options, or any of the other details associated with this complex instrument of compensation. HR departments still tend to simply hand over a packet of legal docs and hope you can make your way through the fine print. For employees, those stock options are like baseball cards in the attic — you know they’re worth something, but have no clue how much.

The Fix:

It’s not hard to find a stock option “calculator” online — but those tools tend to be aimed at financial smartypants-types who already know the terms and variables. Personal Capital’s new stock option tracker, on the other hand, has much broader appeal and utility for anyone with options who wants a visual explanation of what they own and what it’s worth. The tracker lets users track the current and projected value of their stock options, whether or not their company has gone public — giving them a clear picture of their total net worth.

It’s easy to set up. All you need is the name of your company (it works for both public and private companies), and the vesting start date (usually when you started). Then you need four other numbers: the exercise price, the current price, your total shares, and the vesting schedule. To add your options to your Personal Capital Dashboard, add an account using the “+” icon in the top left of the Navigation Bar and clicking “More,” then selecting “Custom Stock Options.”  After you enter your information, you can see the current value of your options, how many have been vested, and even what they might be worth at a given share price. For instance, your can see what their options would be worth if your company’s shares jumped to $100. Dream big!

More importantly, the stock tracker never requires you to upload this info again. Even if your options have a one-year cliff — in which the valuation would be zero until they start vesting after 12 months — you’ll never have to go searching through a bunch of old paperwork to figure out the call price or vesting date. It’s all saved on your Dashboard.

The option tracker can also track restricted stock units, or RSUs: Just create a stock option account with your company name and its ticker code, if one exists. Then enter the grant date for the RSU, and enter a strike price of zero, since the value of the RSU is its price on the day it vests. From there, you can create a custom vesting schedule to match your RSU options — many RSUs have a three- or four-year vesting calendar with a one-year cliff. And voila! Suddenly you have a real look into the most valuable part of your compensation.

Get Started

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