My Employee Stock Options Strategy

As a rookie investor, I am devoting my time (or at least what’s left of it) to understanding the various succesful wealth-creating strategies available that don’t require much of an initial investment. I also want to identify ways to grow my savings at a larger rate than the 0.05% interest rate most banks can afford these days. Using my employer’s stock option program and taking on just a bit more risk, I can do both.

First, a bit of background. In the past three years, I was able to build up a decent amount of emergency savings (at least by my standards) using Wachovia’s Way2Save account. However, when Wells Fargo bought out Wachovia, they changed up the terms, but still leave me with a solid interest rate of 3% APY for 13 months. Unfortunately, after that they drop the rate down to a paltry 0.05% savings account rate, essentially killing any monetary incentive to keep my money in that account.

I soon began to think of other possibilities, weighing the hypothetical rates of return against the risk that I could lose some (or even all) of my hard-earned nest egg. Most would caution to leave your nest egg in a safe savings or money-market account so it is fully protected against loss. While I would normally agree, I believed there had to be a way to make a decent rate of return while limiting my risk (the ideal investment scenario). One day, lightning struck! Recently I’ve been doing a lot of research on how to trade stock options, developing a basic understanding of how they work. I soon realized I had an opportunity to make a 15% or more return (minus taxes, brokerage fees, and tithes) using my employee stock options program.

Here’s how the program works: I put a percentage of my check into a company escrow account for a six-month period. At the end of the period, the savings are applied to purchasing shares of the company. The advantage, however, is that I have the option buy these shares at a whopping 15% discount! I can then turn around and sell these stocks at market price, thereby making much more than if I were to leave my nest egg in that crummy savings account. Even if taxes/fees/tithes took out half of my gross profit, I would still make over a 7% return, more than doubling the Wells Fargo APY in half the time.

Of course, as with any other investing strategies, there are risks.

1. The purchase price is determined by the lower of the stock price on the first and last day of the six-month period. However, if at the end of the period I purchase these shares and the stock immediately takes a nosedive, that could really eat into the return I would receive. However, it would take a lot to drop the stock price 15% in the short time between purchasing the shares and selling them. If the stock price rises, however, that means I could make even more in profit, which is a much more likely scenario.
2. My company could go bankrupt during the six-month period. I’m not sure of all the details and I will have to do some research on this scenario, but if this highly unlikely event happened, I’m fairly certain I would be able to get my money back since the shares don’t get purchased until after the six-month period is over.

As you can see, there is very little risk involved, and the upside is phenominal. Although this is great news for me, how does it benefit my readers? Well, the main takeaway regardless of the outcome is that I’m training myself to identify opportunities for success. I prepared for the opportunity by learning about stock options, figuring I may need the education someday. Because of this preparation, when the opportunity presented itself, I was able to spot it and take advantage. If nothing else, train yourself to spot opportunities so you will be ready when they come your way!

A lot of people miss out on these opportunities because they haven’t trained themselves to see them. I, however, was fortunate enough to be ready. Now that I have a blueprint of my strategy, I have until the next offering period in December to identify any more potential risks and fine print that may throw my plans into disarray.

So what do you think? Solid strategy? Doomed for failure? Have some words of wisdom to share or thought of something I hadn’t? Adobe Creative Suite 6 Design & Web Premium cheap Share them by posting a comment below.

And remember, training your mind to spot opportunities is key. Success is only an opportunity away.