Is the misuse of stock options the cause of corporate failures such as Enron or WorldCom? Or are they a major factor in the success of tech Giants such as Microsoft? And if so, how can they be used properly and misuse prevented? In this Manager Update, Roger Mills answers these questions as well as shedding new light on the issue of executive compensation.
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Out-of-the-money means that exercising the option makes no sense because the shares can be purchased more cheaply than the strike price on the open market. This is distinct from in-the-money where the option can be exercised such that a share can be purchased at a strike price less than its market price, the difference being potential profit.
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