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Investing - Should you buy your Companies Stock Options?

March 26th, 2006

Investing - Should you buy your Companies Stock Options?

Antique Stock Certificate

Stock options are offered to employees at a company as part of a benefit package.  The stock option offered by the employer is usually available for an employee to buy at a set price for a defined time period.  If the company stock goes up in value the employee is still able to purchase at the lower price.  If the price of the stock plummets to below the stock option pricing than it offers no value to the employee.

Why companies offer stock options is for tax breaks.  The company can deduct the expenses on the taxable income.  The accounting departmentís financial statement does not reflect the deduction in their financial statement which makes the company look good on the stock market.  The tax break they gain is also well worth it.


You should never put all of your financial investments into only one company.  This puts you at a higher risk for losing larger sums of money.  The company could be doing well and take a down turn and you stand to lose a lot of your investment. 

Just because your work for a large corporation that has been around a long time does not insure financial security.  Ford motor company and GM are both big companies that are hurting really bad at this time.  Remember Montgomery Ward?  It was a shock to see this huge retailer go bankrupt.  Commodore Computers was a big computer name in the 1980ís and went bankrupt too.


The reality is that while it sounds intriguing to invest in company stock options, you would have to have in your mind to turn it into a quick profit.  A long term investment with one company is probably a risky venture and might not be the best investment strategy.

It would be better to invest in an IRA and diversify into mutual funds.  Stock options in one company in a lot like going to Las Vegas to gamble.  If you are willing to lose your investment and not be that bothered by it than you should go for the stock options.

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Nicole Wilson
Best Syndication

Books on Investing

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