Stock Option Investment Advice

Back-Dated Stock Options

Of late, there’s been a lot of press concerning backdating of stock options. Companies use stock options as incentive for employees to excel in their performance. The idea of employee stock options being if the employees excel, the company will excel and the company, company’s shareholders and the employees will all benefit.

Generally, the idea for employee stock options is to grant stock options with a strike price at the current company’s stock price on the date of stock option grant. If the stock appreciates in price, then thestock options become valuable, if the stock depreciates in price, then the stock options become of lesser value or of no value at all.

But, if the stock options are backdated, the strike price of the options is set for a low point in the price of the company’s stock, giving employees an extra profit when thestock options are exercised.

Backdating of stock options is not necessarily illegal as long as it is disclosed as such by the company, but if the company backdates stock options and falsely reports that they are not backdating, then the company may have engaged in securities fraud.

We analyzed all the stocks listed on the Nasdaq, NYSE and American stock exchanges to determine if a company’s stock options granting appeared to be suspicious. For this analysis we looked at the price of a company’s stock between the date when a company’s report to the SEC indicated the stock options were granted and the date when the report was filed with the SEC. If during the time between the two dates the company’s stock price was at a low point, then the company was flagged as a potential candidate for backdating ofstock options. Simply because the company was flagged by the procedure does not mean the company engaged in backdating of stock options, it only indicates there was an opportunity for backdating of stock options.

The results of our search are shown below (optionable stocks are shown as links) :

AAPL AATI ABBI ABMD ABP ABRI ABTL
ACCL ACFC ACTU ACUS ADBL ADEX ADIC
ADPI ADVNA ADVNB ADZA AEHR AEOS AEPI
AFCO AFFM AFOP AFT AGIX AIRN AIS
AIXD AKN AKSY ALAN ALBY ALDA ALFC
ALSC ALSK ALT ALXN AMAT AMCS AMIS
AMRI AMTC ANAD ANDS ANGN ANLY ANSR
ANSS APFC API APOG APPA APTM AQQ
ARDI ARIA ARRS ARRY ARTC ARTX ARWR
ASEI ASIA ASPM ASYS ASYT ATAR ATPG
ATRM AVII AVNR AVNX AVSR AXTI AXYS
BABY BBSI BCON BCP BDCO BDMS BDSI
BDSIW BEAS BEBE BFAM BFCF BFLY BJRI
BKRS BLSI BLTI BMET BNCN BNHN BOOT
BRBI BRCD BRNC BSET BSML BTUI BUCA
BUF BUSE BVX BWEB BWINA BYFC CAAS
CACS CALD CALM CAMD CAS CASA CATT
CBBO CBIN CBKN CBSH CBSS CBUK CCBI
CCBL CCDC CCOI CCRN CDCY CENF CENT
CERG CESI CEVA CFCI CGPI CHDX CHKE
CHRK CHTT CIZ CKCM CLDN CLRK CMBC
CMD CMRG CNET CNMD CNVR CNY COBZ
COGO COOL CORI CORT COSI COST CPD
CPNO CPTS CRAYD CRDN CRED CRFT CRGN
CRIS CRRB CRTX CRUS CRV CRVL CRZO
CSAR CSCO CSNT CSTL CSWC CTCI CTE
CTLM CTSH CTT CTTY CUTR CVV CWBS
CWLZ CYPB CYTO CYTR DATA DBLE DCAI
DCEL DCOM DCTH DECK DGII DIET DIO
DLIA DMX DNEX DOC DRIV DRTE DSCO
DSPG DTAS DTLK DTSI DWRI DYAX EAGL
EBIX ECMV EFII EFJI EGBN EGY ELGX
ELI ELRC EMAG EMAK EMCI EMIS EMKR
EML END ENG ENPT ENSI ENZN EPAY
EPG EPIC ERES ESBF ESCC ESP EVCI
EVST EXAC EXJF EXPO EZPW FACT FADV
FBEI FBSI FCBC FCCY FCFL FCSE FDRY
FDT FEIC FEP FFBC FFBH FFHS FFIV
FICC FISI FIZ FKFS FLAG FLDR FLIC
FLIR FMAR FMER FNBN FORG FORM FOSL
FRBK FRED FRGO FRME FSBI FSTF FSTR
FSTW FTEK FTHR FTK FZN GABC GBBK
GBCI GDP GEHL GENR GENZ GFLS GFR
GFSI GFX GGI GHCI GHM GILD GISX
GKSR GLAD GLBC GLGC GLOV GMCR GMR
GMXR GPIC GPRO GRAN GSIC GSS GT
GTN GWR HA HAE HAIN HANS HAR
HARL HAUP HAWK HB HC HCC HCT
HDSN HDTV HEB HEII HELX HEPH HES
HH HHS HIBB HILL HITT HIW HKF
HLD HLEX HLF HME HMNF HNR HNZ
HOLL HOMF HORC HOT HPY HRH HRLY
HRSH HRT HSKA HSTM HTRN HTV HW
HWAY HWK HX HYTM IAAC IACI IART
IBNK IBOC ICOC ICON IDMI IDN IDT
IEDU IFF IG IGT IIN IINT ILE
ILMN IM IMAX IMGN IMH IMMC IMMU
INDBN INNO INOC INTL INTU INTX IOM
IOTN IPIX IPSU IR IRF IRIS IRSN
ISIL ISLE ISPH ISRG ISTA ISWI ITI
ITMN ITRA ITW IVAC IVC JAX JBHT
JBSS JCS JMAR JPM JRCC K KBH
KCS KDE KEA KEM KERX KEYN KEYS
KEYW KFY KG KIRK KLAC KMG KMGB
KMT KMX KNSY KNX KONA KOSP KSS
KSW KTO LANC LARK LAUR LAVA LCAV
LCBM LDR LEE LGBT LGN LIFC LIPD
LLL LLY LM LMNX LMS LNC LNG
LNN LNX LOOK LOUD LPHI LTR LTRE
LTXX LUFK LUV LXK MACE MAG MATK
MATR MATW MAXY MBAY MBTF MBVA MCBC
MCBI MCCC MCD MCDT MCDTA MCHP MCRL
MDCC MDII MDR MDTH MDTL MDWV MECA
MEDX MEE MFA MFE MFLX MGAM MGI
MGN MGPI MGRM MHA MHS MIDD MIND
MKSI MLAN MLR MMS MMSI MNTA MOBE
MODT MOSY MOV MOVI MPR MRGO MRVL
MRY MSC MSFG MSGI MTB MTIC MTLG
MTRX MTX MTXCP MTZ MVIS MVK MVL
MVSN MWP MXIM MXWL NATI NAVR NBTB
NDN NETM NGA NGAS NGEN NGS NHC
NHI NHTB NIHD NLCI NLY NMIL NOIZ
NOVN NR NRCI NRG NRGN NSIT NSSC
NTG NTGR NTIQ NTLS NTMD NTOL NTSC
NTWK NURO NUS NUVA NUVO NVD NVEC
NVH NVTL NWL NWRE NWS NX NYER
NYM NYNY NYT OATS OCAS OCCF OCPI
OFC OFG OFIX OI OKE ONI ONT
OPNT OPSW OPTC OPTN OPTV OPWV ORCC
ORCH ORLY OS OSIS OSK OUTD OVTI
OXGN PACT PACW PAGI PALM PANC PANL
PARD PBG PCBI PCBK PCCC PCP PCR
PCTI PCYO PDII PDLI PEET PEG PEIX
PESI PETM PFCB PGNX PGR PH PHLY
PHMD PHRM PHTN PILL PKE PKTR PLCE
PLCM PLL PLMD PLPC PLSB PLUG PLUS
PMI PMID PMRY PNC PNNW PNO PONR
POWI POWL PPBI PPS PRA PRCS PRFT
PRST PRTR PRW PRXI PRZ PSEM PSMT
PSPT PTC PTIE PTN PTRY PULB PVA
PVSA PVTB PWAV PYR QBAK QCOM QD
QGLY QMM QSC QSFT QUIP RADN RATE
RBC RBNF RBPAA RDA RDN REGN RES
REVU RFIL RFMD RGNC RGX RHAT RHD
RI RIGL RITA RIV RIVR RMD ROFO
ROG ROLL RRD RRGB RS RSAS RSTO
RTEC RUS RVI RWT RWY SABA SAFC
SBAC SBEI SBGI SCHL SCLD SCMF SCON
SCRX SCSC SCSS SCT SEIC SEPR SERV
SFD SFLK SFO SGK SGMO SGMS SGR
SGRP SGY SHBI SHFL SHLM SHRP SHS
SIAL SIGA SIGM SIL SIMG SINT SIVB
SIX SKYF SKYW SLE SLP SLTC SLXP
SM SMD SMDI SMF SMIT SMP SMRA
SMTL SMTX SNA SNAK SNCI SNMX SNS
SNTO SNUS SNWL SNX SOFO SOHU SOMX
SONS SORC SPAB SPEC SPLS SPN SPNC
SPPI SR SRCL SRR SRZ SSP SSYS
STBA STEC STEL STG STI STKL STKR
STMP STNR STRL STS STSA SUAI SUNN
SUP SUPX SVM SVNT SVU SVVS SWY
SY SYKE SYMC SYMM SYNA SYNM SYS
SYXI TACX TAGS TALX TAP TASR TBL
TBUS TCBK TCC TDY TEAM TEX TFSM
TGALD TGC THE THS TIK TIN TIV
TIVO TLCV TLGD TLL TMI TNB TNOX
TPGI TRAD TRBS TRCA TRCI TRFX TRLG
TRUE TSC TSCO TSG TSN TSTY TTEC
TTES TTMI TUC TVIN TVL TWAV TWP
TWTC TWTI TWTR TWW TXUI UAHC UBET
UDW UEIC UHCO UIC UIL UMBF UNTY
UQM USEY USM UTHR UTIW UTSI UTX
VASC VASO VBAC VCBI VDSI VERT VGZ
VISG VITA VITL VITR VIVO VLG VLTR
VLTS VNO VOXX VSAT VSF VSTA VSTY
VTEK VTNC VTRU VWPT WAG WBNK WDHD
WEL WFII WFMI WGA WGAT WGII WGL
WGO WGR WGRD WHI WINA WIND WITS
WJCI WPP WSBC WSFS WSSI WSTC WTR
WTSLA WVVI WWW XAN XEC XNPT ZANE
ZBRA ZIGO ZOLL ZOLT ZOMX ZONS ZRAN

Some of the company’s on this list have already acknowledged backdating of options, and in some cases the company’s stock price has depreciated in price as a result. For example on June 29, 2006, Apple Computer (AAPL) indicated it had launched an investigation into its executive stock option grants. In early July, Apple Computer announced it had found some irregularities in the issuance of certain stock option grants, and in early August Apple Computer announced it had discovered more stock option irregularities. From the inital announcement of the investigation the price of Apple Computer’s stock depreciated 14% but has since rebounded. It should be noted that some of the companies coming under scrutiny by the SEC for possible stock option irregularities were not flagged in our search, Broadcom (BRCM) for example.

PowerOptions provides a search engine for finding potential option income generating positions for various strategies for those option investors seeking to “go short”.

[tags]stock options, option income, option investors[/tags]

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