Options, Convertibles, Dual Classes and Splits

Question 1

Options - Outstanding vs Exercisable

Answer 1

Once an option is issued it is outstanding. It is only exercisable once it has passed the vesting period (usually 1-3 years).

Question 2

ITM, ATM, OTM

Answer 2

In-the-Money
At-the-Money
Out-of-The-Money

Question 3

Test for calculating diluted shares:

Answer 3

All outstanding or just exercisable? Outstanding

Do we count out of the money? (NO) – Do not count OTM options

Question 4

Treasury Stock Method - Calculating Options