Many companies issue annual stock option grants to their employees. Receiving a stream of stock options over a period of years can be an incredible benefit. Use this calculator to project how much a series of annual stock option grants could be worth to you.
Annual Stock Option Grants Calculator (Canadian)
Annual Stock Option Grants Calculator (Canadian) Definitions
- Current stock price
- Current stock price. For this calculator, the current stock price is assumed to be the strike price. The strike price is the stock price that your options were issued at. The underlying stock price must exceed the strike price for your options to have any value.
- Stock appreciates at
- This is the annual rate of return you expect from the stock underlying your options. Thanks to the leveraged nature of your stock options, once the underlying stock value has exceeded your strike price, the value of your options will increase at an accelerated rate. The actual rate of return is largely dependent on the type of investments you select. For example, the annual return of the S&P/TSX Composite Index for the 10 year period from December 31, 2009 through December 31, 2019 was 3.9% (source spindices.com). Over the same period the total annual return (including dividends) was 6.9% (source spindices.com). Savings accounts at a bank or credit union may pay as little as 2% or less. It is important to remember that future rates of return can't be predicted with certainty and that investments that pay higher rates of return are subject to higher risk and volatility. The actual rate of return on investments can vary widely over time, especially for long-term investments. This includes the potential loss of principal on your investment.
- Annual stock option grant
- This is the number of stock options you receive each year. The strike price for each year will be calculated as the projected stock price.
- Number of years
- The number of years you expect to hold these options. This can be any number from three to twenty-five.