Should I sell some shares of stock that are owned outright or exercise and sell some non-qualified stock options?
July 28, 1999
Subject: stock options
Date: Thu, 17 Jun 1999
Thank you for your helpful emails. I have a question. Have you any info helpful in making a decision of whether to sell some shares of stock that are owned outright or exercise and sell some nq stock options. The purpose is for diversification. I realize the outright stock sale results in more proceeds so I’m inclined to use shares. But if the stock continues to rise, there would be more of the appreciation realized by holding the stock since cap gains. Any suggestions will be appreciated.
Date: Wed, 28 Jul 1999
Sorry I haven’t responded to your email sooner.
There isn’t an easy answer to your question.
By holding onto your non-qualified options, you will incur more ordinary income if the stock appreciates.
The “outright stock” will qualify for long-term capital gains tax when it is sold.
On the other hand, if the stock price goes down, you will not be “at risk” for any cash if you don’t exercise your non-qualified option.
Maybe it’s time to just start an orderly liquidation and diversification program.