Welcome to the Strategy section!

Knowing what to do with your options is simple, it's the uncertainty of life in the real world that makes it complicated. How do you maximize the value of your options? Simply wait until the price of your stock reaches its highest point, then exercise your options! How do you know when the stock price is at its peak? That's the point, and that's what makes the decisions so difficult. You can't know that. Neither do you know whether the price will go up or down from where it is today. If you know what will happen in the future, it's easy to answer the questions about when to exercise and when to sell.

But we don't know what the future holds. This section provides practical strategies that will help you make these decisions made difficult by an unpredictable world. Here's a brief introduction to this section:

On this page, you’ll find an introduction to two foundational concepts which will help you with the difficult decisions about what to do with your options:

• The Critical Capital™ Strategy

• Five Steps to a Successful Exercise Strategy

On other pages in this section, you’ll find more detailed discussions about how to apply those concepts to the financial circumstances facing you:

• Life Stages – If there are no specific circumstances or concerns requiring you to do something with your options, what you should do to make the most of your options depends upon your financial Life Stage. You’ll find strategies to match your Life Stage here.

The Critical Capital™ Strategy

Employee Stock Options are one of the most powerful wealth creators in our economy today. But that ability to create tremendous wealth comes with tremendous risk. As the price of your company’s stock swings wildly in today’s volatile stock market, the value of your options may swing from worthless to fortune and back to worthless again. Many are paralyzed by the Stock Option Dilemma:  Exercising your options too soon may mean giving up a fortune, if the stock continues to rise. Exercising too late may mean losing a fortune, if the stock plummets.

The objective of the Critical Capital™ Strategy is to deliver you from the Stock Option Dilemma, protecting you from the personal risks of your options without giving up their tremendous upside potential. The key is to use as few of your options as possible to secure your Critical Capital™, while managing the rest to maximize after-tax gains. Return

Five Steps to a Successful Exercise Strategy

• Step 1.  Clarify your goals – Decide what you really want your options to do for you.

• Step 2.  Quantify your goal(s) – Determine how much money you will need to achieve the goal(s).

• Step 3.  Analyze Your Options – Using the tools provided, determine what kind of options you have, how much they are worth, how much leverage they have, when they will vest and when they will expire.

• Step 4.  Calculate the taxes – Figure out what the tax consequences will be of exercising the options and selling the stock.

• Step 5.  Create a Strategy – Decide how and when to exercise the options and sell the stock.  Return

Financial Life Stages

Understanding the critical tasks and issues of the Life Stage you are in is the key to making the most of your options and moving on to the next stage

1. Foundations – You are in the process of establishing the foundations of your family and career.  The focus in this stage is often on making major purchases, typically a home and cars, and settling into a lifestyle you would be satisfied living for the rest of your life.

2. Building Critical Capital – You have made the major purchases and have settled into a comfortable lifestyle.  Your focus is on building Critical Capital, the capital you need to maintain this lifestyle without the need to work.

3. Protecting Critical Capital – You have built your Critical Capital™ and are financially free from the need to work.  The focus is on protecting your Critical Capital.

4. Beyond Critical Capital – You have more than enough and do not believe you will need or spend all that you have in your lifetime.  Your concern is using that “excess” for others, your family and heirs, other organizations or causes you want to support.  Return