Employee stock options are a great benefit. However, you'll need to understand the complexities of this investment option to make the most amount of money.

How to Get the Most Out of Your Employee Stock Options

In addition to your regular salary, your employer may grant you any number of benefits, from health insurance and employer matching of 401K contributions to stock grants and options. If you value investment planning, you should strategize about the best ways to take advantage of these benefits. Here are a few things you should know if you want to get the most out of employee stock options.

Grants versus Options

The first thing you need to understand is the difference between stock grants and stock options, since many companies will offer both. Your investment consultant can explain the ins and outs to you, but the basic difference is that a stock grant means that you have been given stock, free of charge, and that it is yours immediately.  Stock options, on the other hand, vest over time.  When they mature, you can purchase a set number of shares at a set price (which may or may not be lower than market value at the time your options vest).

Know Your Window

There is a lot of terminology surrounding the types of stock bonuses you may receive through your employer.  You might want to speak to an investment management professional to make sure you fully understand what you’re dealing with. One of the most important things to understand is when you can exercise your options.

Your vest date is the day your options mature, which is to say, the day you’re allowed to purchase the shares offered to you. However, you also have a limited window of time in which to exercise your options, or purchase the stock.

Ideally, you’ll buy at lower-than-market prices, but you might have to wait to make that happen. The reason many employees do this is so that they can turn around and sell enough of the stock purchased to cover the purchase price, or even sell all of the stock for a tidy profit, instead of having to buy the stock and then wait for prices to improve. You just have to make sure you don’t miss your window, or your options will expire.

Selling for Maximum Gains

Your agent for wealth management in San Francisco can help you to determine the best time to sell your stocks in order to maximize monetary gains. You won’t pay any taxes on stocks you purchase, but once you sell them you’ll have to add the earnings to your income tax filing.

If you’re able to hang onto the stocks for a while, you can not only enjoy greater profit due to prices increasing over time, but you can pick and choose when to sell, perhaps spacing out sales so as not to bump yourself into a higher tax bracket and pay additional taxes.

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