CVS stock options

[Aznfarmerboi]

Hello, does anybody have any experience with CVS stock options? I was granted 1k in 2010. On Etrade, it says 136 granted at a price of 28.70. It will be vested in a few weeks.

My questions are, if I was granted 1k, how come I got 3903 (136 times 28.70)?

If the stock is now valued at 61 dollars, will I get 8296 (136 times 61) when I cash it out?

How much taxes do I have to pay on it? Is it considered capital gain since it has been more 2 years since I was granted it even though it was unvested/

It would be sweet if I can cash out 8296 a few weeks from now. I plan on spending it in Vegas. However it sounds too good to be true.


Thanks!

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[Dr Wario]

Hello, does anybody have any experience with CVS stock options? I was granted 1k in 2010. On Etrade, it says 136 granted at a price of 28.70. It will be vested in a few weeks.

My questions are, if I was granted 1k, how come I got 3903 (136 times 28.70)?

If the stock is now valued at 61 dollars, will I get 8296 (136 times 61) when I cash it out?

How much taxes do I have to pay on it? Is it considered capital gain since it has been more 2 years since I was granted it even though it was unvested/

It would be sweet if I can cash out 8296 a few weeks from now. I plan on spending it in Vegas. However it sounds too good to be true.


Thanks!

Stock options give you the option of purchasing a stock at a certain price during a certain date or time period. This means that you can purchase 136 shares of cvs stock at the price of 28.70 per share (and sell them if you so desire). The amount of money you get when you exercise the options and subsequently sell the shares is calculated thusly: the market price per share x number of shares - option price per share x number of shares (in the case of the 136 options you are talking about, assuming the market price is about $61 per share when you sell, you will expect to see income of about $4300). As for taxes, yes you will have to pay tax on the money though how the tax is calculated is fairly tricky as some will likely be at ordinary income rates and some will be at long term capitol gains rate.

 

[Aznfarmerboi]

Stock options give you the option of purchasing a stock at a certain price during a certain date or time period. This means that you can purchase 136 shares of cvs stock at the price of 28.70 per share (and sell them if you so desire). The amount of money you get when you exercise the options and subsequently sell the shares is calculated thusly: the market price per share x number of shares - option price per share x number of shares (in the case of the 136 options you are talking about, assuming the market price is about $61 per share when you sell, you will expect to see income of about $4300). As for taxes, yes you will have to pay tax on the money though how the tax is calculated is fairly tricky as some will likely be at ordinary income rates and some will be at long term capitol gains rate.

Ty. Dr Wario, You have been helpful. I guess I wont have 8300 to spend in Vegas. What a bummer. I was going to hit up the craps table with 100s chips and then pop bottles in the clubs after.

 

[Dr Wario]

Ty. Dr Wario, You have been helpful. I guess I wont have 8300 to spend in Vegas. What a bummer. I was going to hit up the craps table with 100s chips and then pop bottles in the clubs after.

Yeah...but if you are planning to having the income a little later this year, you may want to reconsider selling now because if you wait a year after you exercise the option, all the income is treated as capital gains instead of ordinary income.

 

[Old Timer]

So in addition to what was posted earlier:

You get $1000.00 using the Black-Scholes method and that nets to 136 shares at $28.70

You have the option to buy 136 Shares at $28.70: Your cost: $3903.20
You sell them at once 136 shares at $60.89: Your price: $8281.04
Your net is $4377.84. They will withhold about 40% in Federal taxes and send you a check
for about $2,700.00

Now for the tricky part. This will be reported both on your W2 as ordinary income AND on a 1099. Your accountant will show the 1099 and then back it out on whatever schedule they need to so you only get clipped once. If you don't you either pay taxes on it twice or get a letter from the IRS asking for cash.....