Stock Options And Divorce In Illinois

The term “stock options” has a certain mystique. Stock options seem like a sophisticated financial instrument for the rich and about-to-be-rich…and they kind of are.  The problem with sophisticated financial instruments like stock options, is that they are hard to divide in an Illinois divorce.  So, how do you divide stock options in an Illinois divorce? What Are Stock Options? There are two classes of options that people refer to when they say “stock option” One type of stock option is a sophisticated way to buy or sell stocks by betting on the stock’s future value without actually buying the stock. This is usually just called an “option.” This is financial device is not what people usually refer to as a “stock option” in a divorce. I discuss options first, before employee stock options to clarify how the concept of an option works. An option gives an investor the right, but not the obligation, to buy or sell a stock at an agreed upon price and date. Whether you have the right to buy or sell a stock through an option is referred to as “calls” or “puts.” A call is a bet that the stock will go up.  A call might cost as little as $ 2. But it could give you the right to buy a share of Wal-Mart for $ 30.  If Walmart’s stock goes up to $ 50.  You can use your call to buy it for $ 30. That’s an $ 18 profit after the $ 2 call price. A put is a bet the stock will fail.  So, you can bet the right to sell a stock at a price and assume the price will be less than that.  So, if you have a General Electric put for $ 80 and General Electric is priced at $ 50.  You can buy a share of General Electric at $ 50 and then sell it via your put at $ 80 and keep the $ 30 difference. These types of stock options usually only last for a short period of time. They never last more than 2 years. Because of the short time frame, these types of independently exercised stock options are never divided in a divorce because the expiration date usually passes before the divorce is finalized. Type of Option Description Call Option A call option gives the investor the right to buy a stock […]

from Russell D. Knight | Family Lawyer Chicago https://rdklegal.com/stock-options-and-divorce-in-illinois/