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Lesson 2. Why Options Are Important > Options and Your Portfolio - Pg. 8

Why Options Are Important 8 Many employees will look at stock options as a "gift horse" and not worry about their value. However, employee stock options should be viewed in the context of your total compensation package. It is not uncommon for people to make several career moves before retirement. The value of stock options, with either your present employer or your new employer, should enter into your compen- sation comparisons. Here are some considerations: · Young companies often grant stock options on a more sporadic basis. Their stock may be very volatile, making it hard to predict what a stock option will be worth in the future. · Older companies may have a history of granting stock options on a regular basis, but their stock may not grow as fast as that of a younger company. · Stock options from private companies are often hard to value and the stock may be difficult to sell after the option is exercised. Options and Your Portfolio There are no precise figures on how many people exercise their options and immediately sell the stock for a profit. As tempting as this strategy is, you may want to consider the benefits of holding onto the stock. All investment decisions should be made in the context of your total financial situation. Whether you should take the cash or hold the stock is a decision that each person must make individually, since no two people have the identical financial goals and needs. Caution Do the math. Some options may not be as profitable if you have to pay income tax on the