Stock Options Calculatorfor Employee Stock Option Valuation

Explains what Employee Stock Options (ESO) are and helps you to forecast the year-by-year growth of any ESOs you've been granted.

This free online Stock Options Calculator will calculate the future value of your employees stock options (ESOs) based on the anticipated growth rate of the underlying company shares.

Plus, the employees stock option calculator on this page also allows you to enter up to 2 alternate growth rates and generates a year-by-year growth chart so you can compare the growth of up to three different scenarios.

What Are Employees Stock Options?

Basically, employee stock options (ESO) are a form of equity compensation offered to employees by a corporation.

More specifically, a corporation grants stock options to employees as an incentive to help build the value of the company, which in turn increases the value of the granted options.

Vesting Schedule

Typically, the employee's right to exercise a portion of their options (buy the underlying shares) increases with time. This is referred to as a vesting schedule -- where the percentage of options the employee can exercise increases with the length of time they remain an employee of the granting corporation.

To illustrate vesting, if an employee were granted 100 ESOs and after 1-year of employment they were considered to be 25% vested, the employee would then have the right to exercise 25 (100 x .25 = 25) of their ESOs. If they are 100% vested (fully vested) they would then have the right to exercise all of their ESOs.

Exercising Options

When an employee exercises their options, they are able to buy the company stock at the predefined strike price, and then sell the purchased shares at the market price. The difference between the strike price and the market price is called the spread.

If the strike price of the underlying stock is less than the market value (negative spread), then there would be nothing to gain from exercising ESOs. Exercising the ESOs only makes sense when the strike price is below the market price (positive spread, or in the money options).

Important Points to Consider

This basic explanation of ESOs barely scratches the surface of all the types and intricacies of ESOs, so be sure to consult a qualified financial planner for expert guidance. In the meantime, here are a few important points to keep in mind.

• The financial gain realized when exercising ESOs is taxed as ordinary income.
• ESOs have no marketable value and are typically considered to be non-transferable.
• ESOs normally cannot be held after termination of employment.
• Study the Company Stock Options Plan carefully before taking a job just for the stock options, and certainly before exercising your options.

With that, let's use the Employees Stock Options Calculator to calculate the future value of your company stock option growth.

Employees Stock Options Calculator

Instructions: Enter the current price per share of the underlying stock, the number of shares granted, and the number of years you would like to calculate growth for.

Next, enter the strike price of the options, the anticipated growth rate, and up to 2 optional growth rates for comparison purposes, then click the "Calculate Future Company Stock Option Value" button.

Note that you can calculate the anticipated growth rate based on historical growth using the Stock Growth Rate Calculator (opens in a new window).

Mouse over the blue question marks for a further explanation of each entry field. More in-depth explanations can be found in the glossary of terms located beneath the Employee Stock Options Calculator.

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Current market price of stock (\$):
Number of options (#):
Number of years (#):
Option strike price (\$):
Stock growth rate (%):
Optional stock growth rate #1 (%):
Optional stock growth rate #2 (%):
Market value of exercised options at end of term:
Cash needed to exercise options at end of term:
Stock option value (spread) at end of term:
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Employee Stock Options Calculator Glossary of Terms

Current market price of stock: Enter the current market price per share of your company's stock.

Number of options: Enter the number of options you were granted.

Number of years: Enter the number of years you would like to calculate growth for.

Strike price: Enter the strike price of the company stock options you were granted. The strike price is usually the price per share you will pay if you exercise your options. In order to be in the money, the strike price must be lower than the market price.

Growth rate: Enter the expected growth rate of the underlying company stock. Please enter as a percentage (for .06, enter 6%). If you would like to base the growth rate on the historical growth of the company, you can use the Growth Rate Calculator (opens in a new window) on this site.

Optional growth rate #1: Enter an alternate growth rate for comparison purposes. If a valid entry is made to this field the stock options calculator will include an additional growth column in the year-by-year chart.

Optional growth rate #2: Enter a second alternate growth rate for comparison purposes. If a valid entry is made to this field the stock options calculator will include an additional growth column in the year-by-year chart.

Market value of exercised options at end of term: Based on your entries, this is how much you could sell your shares for if you exercised all of your options at the end of the entered number of years.

Cash needed to exercise options at end of term: Based on your entries, this is how much cash you would need to exercise all of your options.

Stock option value (spread) at end of term: Based on your entries, this will be the value of your stock options after the entered number of years. In order to realize this value, you must be fully vested, exercise the options at the end of the entered number of years, and sell the shares at the calculated ending market price.

Stock Options Calculator

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