Value vested stock options as the spread between share price and strike, after tax.
Options are worth the spread, not the share price, and only the vested portion is available. The exercise cost is real cash you must find up front, which is why a large paper gain can still be hard to realise. Employees consistently overestimate option value by using the share price rather than the spread, and by ignoring both the exercise cost and the tax charge on exercise.
Stock Option Value
Net value = vested options × (share price − strike) × (1 − tax rate)
Net value = vested options × (share price − strike) × (1 − tax rate) Options are worth the spread, not the share price, and only the vested portion is available. The exercise cost is real cash you must find up front, which is why a large paper gain can still be hard to realise.
Employees consistently overestimate option value by using the share price rather than the spread, and by ignoring both the exercise cost and the tax charge on exercise.
This calculator takes 5 inputs: Options held, Strike price, Current or expected share price, Share of the grant vested, Tax rate on the gain. The pre-filled defaults are a realistic starting point — replace them with figures from your own environment for a result you can act on.