About the Valuation of Stock Options

Video Transcript

"Okay, when you're doing valuation of stock options, you're in essence doing the same thing you would do for the equity itself. You're going to look it all the same things. You're going to look at the price of the equity. You're going to look at the, you know, price to earnings ratio; look at the earnings per share; look at the profitability of the company; look at the general valuations, dividends, anything that is important to you and the value of that stock, why you're buying it for buying it for growth or income or both. And when you look at the options in your valuation, you're also going to look at in the options, if that's what's you're working with, what those expenses are going to be because that will work against the value of the equity in the end; that will affect your overall gain. So doing valuations for stock options is really doing two things. It's looking at the equity and looking at the contract and comparing the two. Bringing that together and all of those expenses combine; if you can still look at a positive valuation on that equity, then it's probably a good, a good purchase for you. But otherwise, keep looking and you will find some really good contracts."