Ellison on Black Scholes
- Thread starter aphexcoil
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I assume these guys were doing similar things like MSFT (selling OTM puts) to cover some of the option grant costs during the bull market. They very well know how to price options. next thing he'll be plugging in a 5% vol into a B&S model. Can't blame him though. If he is able to shave a few points off the price, they'll save a fortune on their bottom line. he talks a good game.
So Ellision is saying, "Sure we'll expense stock options, but just not at the actual value their worth.........." I'm guessing that if for some reason they were including the stock options as revenue, that Ellision would find a way to increase the value of the options, something along the lines of "Well if you look at the 10 year average vol of our options, these things are worth 10X what they're really trading for !!" LOL----GOD BLESS AMERICAN BUSINESS
Vega
Vega
This options stuff is such crap. I can see some small argument for incentive options for a start-up, not that they couldn't grant restricted stock and accomplish it better. But for these giant multi billion dollar companies, the arguments are ludicrous and an insult to investors.
Any company that has a derivatives book is forced to value them. Somehow they are able to do that, but it is just way too hard for options used for compensation? Puhleeze. Ok, then expense the difference in the stock price and exercise price when exercised. At least then you show an actual expense, even though it way understates the economic value of the option. But don't pretend it doesn't exist.
Incentive options are basically an accounting fraud and theft from shareholders. It is fraud because they disguise a compensation expense as a balance sheet adjustment. It is theft because the board of directors have no right to give executives shareholders' property. It is the company's responsibility to pay employees, not the shareholders. Finally, options create horribly wrong incentives that lead to disasters like Tyco, Enron and Worldcom. Exec's benefit from short term stock volatility, not long term value creation.
If the boards are too craven and conflicted to insist that exec's work for a salary and buy stock the same way we do, then let them grant restricted stock, which can be sold only after retirement.
Any company that has a derivatives book is forced to value them. Somehow they are able to do that, but it is just way too hard for options used for compensation? Puhleeze. Ok, then expense the difference in the stock price and exercise price when exercised. At least then you show an actual expense, even though it way understates the economic value of the option. But don't pretend it doesn't exist.
Incentive options are basically an accounting fraud and theft from shareholders. It is fraud because they disguise a compensation expense as a balance sheet adjustment. It is theft because the board of directors have no right to give executives shareholders' property. It is the company's responsibility to pay employees, not the shareholders. Finally, options create horribly wrong incentives that lead to disasters like Tyco, Enron and Worldcom. Exec's benefit from short term stock volatility, not long term value creation.
If the boards are too craven and conflicted to insist that exec's work for a salary and buy stock the same way we do, then let them grant restricted stock, which can be sold only after retirement.