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The company I work for just got the crap beat out of it today in the market. I have some stock options that are exercisable but I believe the stock will go back up, just not very soon. Normally I would just hold them but I don't know how much longer I'll be working for this company (can't stand living in Texas anymore!). I was thinking about purchasing the shares outright, doing a cash exercise of my options, (being charge # shares * todays price + taxes on profit from todays price minus strike price). This brings up a couple of questions.
First, Why do I have to pay the taxes on the difference between the strike price and the current price today? Won't I just have to pay taxes on the difference between today's price and the price when I sell them? How is this different than paying taxes on the price when I sell them and the strike price?
Second, Is doing a cash exercise done best when the price is as low as possible? Obviously if you were going to do a same day cash sell, you'd want the price to be as high as possible.
Last, has anyone done a sell to cover? For some reason this choice seems like I'm getting rooked.
Anyone done anything similar?
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