Stock options

[stang]

My compny gives out hire on stock options. But they vest over a 5 year period. Right now For some reason the stock price are up pretty high. Having been with the company 2.5 years I could only potentially sell 40% of my stock options. If I sold my SO right now I could make 20-25K (which would be awesome as I am in the process of building a new house, and am seing my credit card bill keep going higher)

However I guess the potential is that these stocks just keep going up over the next 3 years, and I could be sitting with way more then I could sell for now. Especially since we have our Oilsands project scheduled to come online in August fo this year. (I work for CNRL, stock quote CNQ)

So what does CP recommend? I am kind of leaning towards the sell some now while high, but since I have to leave some in they can sit for 3 years. At least I will be feeling better about our house situation NOW and I will still retain 60% of the SO for if something crazy DOES happen.. (like a split or prices continue to skyrocket)

[Jason14h]

Do you have any captial losses you want to offset with some positive capital gain for tax reasoning? Tax considerations should also be made with this decision, as you are going to be paying 15-25% depeding on your bracket.

[Sylvanfan]

Well I don't care what anyone says, taking some profits for selling stocks is always a good move. I'd probably sell off like half or so. That way you get your profits today, and keep some for future growth. When you keep stock....you always run the risk that you could lose everything overnight although that is extremely unlikely. But if you do sell keep the tax considerations in mind, like don't spend the 12 grand and than get stuck with a 3 grand tax bill come next April.

[Cowboy89]

Empirical studies suggest that the best way to maximize value out of stock options is to excercise right before maturity. However you're in a commodity driven business that is cyclical and right now at yet another high water mark. Ask yourself whether or not China will continue to grow at 10% per year after the Olympics and after they stop subsidizing gasoline for retail sale to their population.

Also if you're in debt and getting in deeper, excercising now might be a good choice and you'll still have 60% of your options to capture some potential upside for the remainder of their maturity.

[Bring_Back_Shantz]

Okay, take this advice for what it is.

CNQ probably isn't going to tank anytime soon. Hell even if the stock price only rises 10% per year you're still well ahead of the mortgage payments.

My feeling with stock options is that as long as you can see your company growing, which CNRL is likely to do, then hang on to them untill they are ready to expire and you'll get the maximum value.

I hung onto everything my company gave me from the day I started untill it hit the magic number for me to pay off my mortgage and cashed them in then.
The stock has still gone up quite a bit, so I left some money on the table, but I'm debt free so I'm pretty happy about that.

If I'd cashed them in earlier, I'd still have a mortgage, and I'd be wishing that I'd held on to maximize their value.

So if you're gonna cash them out, make sure set the price you want to sell them for and don't look back because you're almost always going to leaving something on the table. And make sure you're cashing them out for something of value, so that you don't look back and think you could have gottem more.

So if you're doing it to pay off some high interest debt, it's probalby a good idea.
If you're doing it for a trip to Mexico, you'll probalby feel better about waiting.

[stang]

Originally Posted by Jason14h

Do you have any captial losses you want to offset with some positive capital gain for tax reasoning? Tax considerations should also be made with this decision, as you are going to be paying 15-25% depeding on your bracket.

Not quite sure what you said about the first part (I am new to this stuff) but I will probally be paying 25% tax and thats taken into consideration

[Sylvanfan]

Originally Posted by stang

Not quite sure what you said about the first part (I am new to this stuff) but I will probally be paying 25% tax and thats taken into consideration

If you had a capital loss, ie, sold stocks at a loss outside of a registered investment, you can use that to offset any gains that you'd make for this.

[stang]

Originally Posted by Sylvanfan

Well I don't care what anyone says, taking some profits for selling stocks is always a good move. I'd probably sell off like half or so. That way you get your profits today, and keep some for future growth. When you keep stock....you always run the risk that you could lose everything overnight although that is extremely unlikely. But if you do sell keep the tax considerations in mind, like don't spend the 12 grand and than get stuck with a 3 grand tax bill come next April.

That is kind of what I am thinking...

Originally Posted by Cowboy89

Empirical studies suggest that the best way to maximize value out of stock options is to excercise right before maturity. However you're in a commodity driven business that is cyclical and right now at yet another high water mark. Ask yourself whether or not China will continue to grow at 10% per year after the Olympics and after they stop subsidizing gasoline for retail sale to their population.

Also if you're in debt and getting in deeper, excercising now might be a good choice and you'll still have 60% of your options to capture some potential upside for the remainder of their maturity.

DOnt understand the first part... But for the 2nd part I am not REALLY sinking into debt, I mean right now I am spending more then I make (building a new house so obviously) but in a month or so it should level out and I will be able to start paying those debts down..

Originally Posted by Bring_Back_Shantz

Okay, take this advice for what it is.

CNQ probably isn't going to tank anytime soon. Hell even if the stock price only rises 10% per year you're still well ahead of the mortgage payments.

This is the flip side... I can see it rising and in 3 years I might not have my mortgage...

[stang]

Originally Posted by Sylvanfan

If you had a capital loss, ie, sold stocks at a loss outside of a registered investment, you can use that to offset any gains that you'd make for this.

I am pretty sure I have NO capital losses.

[Sylvanfan]

Could you possibly look at taking your profits and gettting a margin account? Essentially what you sell and take as profits to pay off your credit card. You than have a credit line that you rebuy the same amount of stock at the price you just sold for. That way you could write off half of that interest and still have the same upside. It's a somewhat riskier play, and essentially what you'd be doing is converting your higher interest credit card debt that you can't write off into a lower interest loan that you can write off a part of.

[stang]

^^^interesting... Where can I read more? Do you get a margin account from your bank?

Also will buying out my SO's and then using that money to buy new stocks be worth it? WOuld I lose money in the long run? break even? What about in the case of a split? Would I lose out because I have less stocks even though I dont have a strike price? My head tells me no, but I have been wrong before...

[photon]

Nice Sylvanfan!

stang, YGPM regarding CNRL.

[Locke]

Originally Posted by Bring_Back_Shantz

Okay, take this advice for what it is.

CNQ probably isn't going to tank anytime soon. Hell even if the stock price only rises 10% per year you're still well ahead of the mortgage payments.

My feeling with stock options is that as long as you can see your company growing, which CNRL is likely to do, then hang on to them untill they are ready to expire and you'll get the maximum value.

I hung onto everything my company gave me from the day I started untill it hit the magic number for me to pay off my mortgage and cashed them in then.
The stock has still gone up quite a bit, so I left some money on the table, but I'm debt free so I'm pretty happy about that.

If I'd cashed them in earlier, I'd still have a mortgage, and I'd be wishing that I'd held on to maximize their value.

So if you're gonna cash them out, make sure set the price you want to sell them for and don't look back because you're almost always going to leaving something on the table. And make sure you're cashing them out for something of value, so that you don't look back and think you could have gottem more.

So if you're doing it to pay off some high interest debt, it's probalby a good idea.
If you're doing it for a trip to Mexico, you'll probalby feel better about waiting.

I like this idea. Set a price that has personal value to offset any future regret.

[Sylvanfan]

You can get a margin account from the discount broker services that all major banks offer. You can also just get a line of credit and use it just for investing purposes too, try to get the best interest rate you can. But if you want to consider that, you'll need to get advice from someone much better schooled in this than me and be able to fully explain how your stock option plan works.

[stang]

Originally Posted by photon

Nice Sylvanfan!

stang, YGPM regarding CNRL.

Replied

Originally Posted by Sylvanfan

You can get a margin account from the discount broker services that all major banks offer. You can also just get a line of credit and use it just for investing purposes too, try to get the best interest rate you can. But if you want to consider that, you'll need to get advice from someone much better schooled in this than me and be able to fully explain how your stock option plan works.

I am going to look into this, but I am not swimming in debt. definitly NOT over my head.

[Frequitude]

stang, I'm in the same boat but I work for Suncor. I exercised 25% of my currently vested options this week because
a) I think the recent run up in oil and the oilsands sector is a little ahead of itself right now.
b) I have capital losses to offset.
c) I want to diversify. This recent run up has placed the vast majority of my investment value in SU.

I plan to hold onto the rest until they make me exercise.

[macker]

Sell 25%. There is more downside potential with CNQ then upside imo. Take 25% off the table and start paying off those nasty credit cards....Evaluate things again after the summer driving season and then possibly sell another 25% at that time....cash is king so don't get greedy! Besides.....sell in May & go away.....

[Sylvanfan]

Originally Posted by stang

I am going to look into this, but I am not swimming in debt. definitly NOT over my head.

Well the reason for doing this is to make the debt that you do have at a lower rate and tax deductable, which in my opinion is always a good move. Having debt is actually a good thing, if it's this type of debt, and you're managing it properly.

[stang]

Originally Posted by Frequitude

stang, I'm in the same boat but I work for Suncor. I exercised 25% of my currently vested options this week because
a) I think the recent run up in oil and the oilsands sector is a little ahead of itself right now.
b) I have capital losses to offset.
c) I want to diversify. This recent run up has placed the vast majority of my investment value in SU.

I plan to hold onto the rest until they make me exercise.

I am thinking the run up is a little ahead of itself too... it only make sense why its been climbing like a madman (actually its dropping today haha) But in 3 years it should hopefully still be strong.

DOes you companys split its stocks? When our get high (usually around $80) they split them usually.

Originally Posted by macker

Sell 25%. There is more downside potential with CNQ then upside imo.

Why?

[Frequitude]

Originally Posted by stang

DOes you companys split its stocks? When our get high (usually around $80) they split them usually.

Yep, Suncor actually split 2 weeks ago.

Originally Posted by stang

Why?

Agreed, why??? Horizon's going to start pumping here on the, errr..., horizon is it not? And investors tend not to put full value in Oilsands projects until they are pumping. I'd say that relative to its peers, CNRL has little downside and pretty good upside.

In absolute terms it, along with all oilsands companies, has some short term downside once the market realizes that this recent crazy run up on the price of oil is based more on fear than market fundamentals.