Weighing Options With Robert Olstein

Hey home-gamers, don't beat yourself up for missing the options-backdating scandal. Even renowned stock sleuth Robert Olstein says it was nearly impossible to spot.

The recently unearthed scandal, which has revived Main Street's skepticism into corporate accounting practices, centers on how certain companies priced options granted to their executives. And despite all the sharp pencils wielded by Wall Street's analyst community, it took an associate professor of finance at the University of Iowa named Erik Lie to uncover it.

Employee stock options typically carry a strike price equivalent to the market price of the stock on the day they are granted. But more than a dozen companies so far have been identified as having suspiciously granted options on what turned out to be their stock's near-term or 52-week low. The accusation is that the companies set the strike price for the options after they were actually granted so as to take advantage of low prices, which yield a greater payout if the market value goes up. ...