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| lic assistant
| He will have to put up other securities in addition to the optioned stock. There are a number of alternatives available to him. Once again, the interest expense will not be deductible unless the loan is secured by a residence. In most cases collateral will be required, however. Regardless of how he arranges his loan, of course, he will have to pay the money back. • He can take a bank loan. • If the option is exercisable over an extended period of time, he can exercise part of the option and then use this stock to pay for the new stock as each installment is exercised, without gain on the stock used in payment. Financing Stock Options An executive is often faced with the problem of finding the money to exercise his stock options. He can sell some of the stock, repay the loan, and still have his profit. If he's bought in a rising market, however, that can be fairly painless. • He can arrange for a loan from the company or from existing pension or profit-sharing funds. This is because the loan is made to buy stock and the usual margin requirements for this type of transaction must be met. |