Questions and Answers on Managing Employee Stock Options

Editor's note: The soaring stock market has left many participants in incentive stock-option programs sitting on substantial paper profits. Last month, David Edwards offered strategies for managing and diversifying out of these positions. Today, he follows up with questions and answers on several related issues.

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Don't Count on Repricing

Won't employees be protected by options repricing if the company stock declines precipitously?

When a company's stock falls sharply, management may elect to reprice employee options to market levels. This move is extremely unpopular with outside shareholders, so you shouldn't count on its protection. Besides, management usually resets the vesting period, so you would have to wait longer to exercise your repriced options. ...