Netflix allows employees to buy options of stock at current price as strike price at 40% premium pre-tax. How is it better than buying open market options of Netflix stock at current price as strike price at about 20% premium only(2 year+ expiry) Did some math on different scenarios. Looks like open market options purchase always trumps paying for 40% option premium. Granted, employee options don’t expire for many more years. Is that the only factor that is making it worthwhile? Any math savvy folks can do shed some light?
Price for option is based on current stock price, volatility, strike price and expiration date. If you apply Black-Scholes model the price for 10 yr expiration options comes out nearly 40-45%
That makes sense. So 40% premium is just a fair premium for the 10 year expiration. I guess another factor is that it is a key way to defer income to pay tax later. So there is some value in that as well.
Can you be more specific about the exact options offered by Netflix, and how they are priced?
You can google Netflix stock options program. It’s on the website.
Can’t find specifics. Link? They can buy options for what price? Strike = current price + 40%?
http://benefits.netflix.com/financial-benefits/stock-option-program strange this page is not google searchable.
So it looks like: Options are bought monthly. Up to 100% of pay + some free allowance is spent on options. Option price = 40% of stock price Strike price = stock price Expiry: 10 years from purchase date This seems like a very good deal.
Not such a good deal if it's fairly priced, same as stock market open options.
Strike price is equal to current price. But since you paid 40% premium you need stock price to go up 40% to break even.
Does this mean it will cost you 40% of the stock price to buy one option?
Yes
On average you get $1.58 present day value for every $1 invested. Simulations of gain from participating in the plan assuming: - long term the stock increases at 5% p.a. - risk free interest rate of 2% - stock volatility of 30% - in the plan for 1 year Ignore the y axis label. It’s late.
How much on an average did a netflix engineer hold in netflix stock if they worked 5+ years at netflix. Just curious. Any millionaire engineers?
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The options may be priced cheaper than current market options despite both being set at the stock’s current price, so it may be cheaper to buy it through Netflix?