Microsoft KB Archive/123015

= Money: How to Track Employee Stock Options in Microsoft Money =

Article ID: 123015

Article Last Modified on 1/19/2007

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APPLIES TO


 * Microsoft Money 98 Standard Edition
 * Microsoft Money 95
 * Microsoft Money 97 Standard Edition
 * Microsoft Money 3.0 Standard Edition
 * Microsoft Money 98 Deluxe Edition
 * Microsoft Money 98 Financial Suite Edition

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This article was previously published under Q123015



SUMMARY
An employee "option" is a contract that allows you to trade a security at some future date. Typically, employee options are given as bonuses or incentives by employers. Under these type of contracts, the issuer (employer) finances the buying or selling of the shares of stocks. When the option is exercised, the issuer (employer) receives the initial contribution back and the difference between the buy and sell prices is given to the employee.

For example, if your company issued you a stock option agreement for 100 shares of stock at a strike price of $50.00, the total value of this option is $5,000.00. This is the amount of money needed to buy these shares of stocks. If the market price of this stock is $60.00 at the time you exercise your option, the total income received from this sale will be $6,000.00. Your company would receive its initial $5,000.00, and you would keep the difference (that is, $1,000.00).

Because you do not fund the purchase of the stock, you must be careful how you track this information in Money. (To track this type of investment, refer to the "Steps to Set Up Option Investments" section below.)

Also, some option agreements may "vest" over a period of time. In other words, a percentage of the total amount of shares may be exercised after a certain length of time. Each year, the percentage increases until the entire amount of shares can be exercised. (To track vested options, refer to the "Steps to Set Up a Vested Option" section of this article.)

STEPS TO SET UP OPTION INVESTMENTS
To enter employee option investments transactions in Money, follow these steps:
 * 1) Create an Investment Account with an Associated Cash Account. You may want to name the account "Options."
 * 2) Enter a Buy activity for the option, and enter the total amount of shares specified in the option agreement and the purchase price.
 * 3) When you exercise the option, enter a sell activity for the total number of shares sold. Enter the current market price at which the shares were sold.

Your net gain or loss is reflected in the Associated Cash Account.

For example, let's say you are holding an option agreement from 1/1/95 for 100 shares of Wide World Importers stock, with a guaranteed purchase price of $50.00. On 9/1/96, you exercise your option at a current market price of $60.00. To track this investment activity in Money, you would enter the following two transactions in your Investment Account:   DATE      INVESTMENT    ACTIVITY    QTY    PRICE      TOTAL/Transfer --       ---    -      --

9/1/93   Wide World    Buy         100    $50.00     $5,000

Transfer: Cash:Options

9/1/94   Wide World    Sell        100    $60.00     $6,000

Transfer: Cash:Options Net Earnings = $1,000.00 NOTE: The negative value in the Associated Cash Account will be offset by the total proceeds from the sale of the option. The difference will be your gain or loss.

Limitations of Tracking This Type of Investment
The negative value in the associated cash account will negatively affect your Net Worth Report and Income And Expense Report. You can customize these reports to exclude this account. Once the option is exercised, these reports should be accurate.

STEPS TO TRACK VESTED OPTIONS

 * 1) Create an Investment Account with an Associated Cash Account. You may want to name the account "Options."
 * 2) Enter a Buy transaction to represent the option agreement.

When you enter the buy activity for a stock option, type only the number of vested shares in the Quantity field. In the Memo field, type the number of unvested shares for reference. Transfer the funds from the associated cash account described in step 1.
 * 1) When additional shares vest, increase the number of shares in the Quantity field of the original Buy transaction, and subtract the corresponding number from the Memo field.
 * 2) Enter the sell activity when you exercise the option. Note, the total amount you sell has to be less than or equal to the total shares vested. For example, if you only have 50 shares of the options vested, you can only sell up to 50 shares. Transfer the funds to the associated cash account as described above.

For more information regarding Investments Accounts and Asset Accounts, see your "Microsoft Money User's Guide" or the online Help file.

Additional query words: w_money mutual funds opt Investments 97 6.0 rex

Keywords: kbhowto kbhowto kbmoneyinvest KB123015

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