What if the market value of my employee stock options is different from my ending balance?

The market value and cost basis of employee stock options are calculated differently than they are for other securities.

Your options are available for exercise according to your employer's vesting schedule. Employee stock option calculations are based on the number of available shares, that is, the number of vested shares, minus the number you've already exercised. Quicken displays your number of available shares in the Portfolio.

The market value of an employee stock option is the number of available shares multiplied by the difference between the market price and the exercise price.

An employee stock option doesn't have a cost basis, since you don't pay anything to get it. If you exercise and hold shares from an option, the shares of the stock have a cost basis based on the exercise price or the market price, depending on the type of option (nonqualified or qualified).

Notes

• Vesting Schedule: When you receive an employee stock option grant, you usually cannot exercise your options right away. Typically you vest in your options over an extended period of time. For example, you may vest in 20 percent of your options after the first year, and then vest in an additional 20 percent of your options in each subsequent year.
• Cost basis equals the total cost to you of a security you purchased. It includes commissions, fees, and mutual fund loads. It also includes all purchases, even reinvestments of dividends and capital gains distributions. However, it excludes the cost of any shares you have sold or given away. Also, it is reduced in a return-of-capital transaction.
• Tax implications of employee stock options vary, depending on whether your options are qualified (incentive) or nonqualified. The Capital Gains Estimator does not calculate estimated tax or net gain for employee stock options.