European Stock Option Example
Demonstration of a European Stock Option exercise
Mr Smith has been awarded 30,000 shares in Euro plc at an option price of €1.00, which he will be allowed to exercise after a set period. Share price on exercise is €2.50
| Sell to cover option cost | € |
|---|---|
| Option cost loan | (30,000.00) |
| Shares sold to option cost loan = 12,000 (€30,000.00 / €2.50) | 30,000.00 |
| Net proceeds after sale and deduction of liabilities | 0.00 |
| Balance of shares received = 18,000 | |
| Profit calculation for tax liability | |
| Current value (12,000 x €2.50) | 30,000.00 |
| Option cost (12,000 x €1.00) | (12,000.00) |
| Profit on exercise | 18,000.00 |
| Profit converted back to Sterling at 1.25 | £7,200.00 |
| Sell all shares | |
| Sale proceeds from sale of 30,000 at €2.50 | 75,000.00 |
| Less | |
| Option cost loan | (30,000.00) |
| Total net proceeds | 45,000.00 |
| Proceeds converted back to Sterling at 1.80 | £36,000.00 |
Profit and Proceeds could be subject to tax , depending on the structure of the plan granted
Please note that this example does not include, or allow for, any fees or charges