This stock options calculator helps you estimate the benefit from the stock options (ESO) offer you may receive from your current or future employer. There is in depth information on this subject below the form.
How does this stock options calculator work?
This financial tool is designed to help employees figure out the value of the stock options they are offered by their employers by considering the following variables:
Current stock price per share (CSP) represents to how much a share is valued on the stock market today.
Number of options (shares) granted per year (NOS) this is the effective shares you would receive on an annual basis from your employer.
Number of years to receive options (NOY) is the exact period of time the employers is going to offer you the stock options.
Strike price per share (SPS) generally refers to the price at which a put or call option can be exercised. In this case it refers to a price that is usually set by employers at a higher value than the current stock price in order to incentivize the employees.
Stock price growth rate per year (SGW) refers to how much do you expect that the stock price will grow from one year to another. Please note that this is a fixed average growth rate which is applied for the given period (NOY years) and that is in directly impacted by the company’s results and profits over the given time frame.
The algorithm behind this stock options calculator applies the formulas explained below:
Share price at the end of the term ([NOY] years)
A = CSP * ((1+SGW/100)^NOY)
Average strike price within the given period of time
B = SPS * ((1+SGW/100)^(NOY/2))
Total number of options (shares) you would receive in [NOY] years
C = NOS * NOY
Value of the stock options
D = C * (A - B)
Please take account of the fact that the strike price is considered to grow at the same rate as the share price.
What are employees stock options from the two perspectives: employee and employer?
Employees stock options can be defined as an incentive or a privilege offered by the employers to their employees, that gives the last part the right, but not the obligation, to buy a certain numbers of shares per year at a predetermined share price within a given time frame.
While it may also be referred to as “share options” this is a measure employers take in order to motivate their employees to do their best in order to achieve higher performances that finally impacts the growth of the company’s share price.
Example of a calculation
Assuming that a company is offering their employers a granted annual stock options of 100 shares, within a period of time of 5 years at an initial price of $50, the initial strike price is $54, which is the total compensation package an employee gets in case he estimates that the share price will increase with 15% year per year?
■ Share price at the end of the term 5 years: $100.57
■ Average strike price within the given period of time: $76.58
■ Total number of options (shares) you would receive in 5 years: $500
■ Value of the stock options: $11,991.9011 Mar, 2015