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You are manager of an airline company. The company issues stock options to its employees that...

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Finance

You are manager of an airline company. The company issues stockoptions to its employees that have a fixed exercise price and termto maturity. Your company is very efficient and well managedcompared to its competitors. However, due to a significant rise inthe world price of oil, all airline stocks fall and your optionsexpire “out of the money”.

Managers complain this is not fair. Discuss this viewpoint andsuggest any solutions?

Answer & Explanation Solved by verified expert
3.7 Ratings (409 Votes)
Lets understand the situation first Suppose the airline company has provided its employees with the option of purchasing its stocks at 100 per share currently trading at 130 with a certain maturity period However due to rise in the prices of oil the airlines stock prices falls to 90 therefore making the options out of    See Answer
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You are manager of an airline company. The company issues stockoptions to its employees that have a fixed exercise price and termto maturity. Your company is very efficient and well managedcompared to its competitors. However, due to a significant rise inthe world price of oil, all airline stocks fall and your optionsexpire “out of the money”.Managers complain this is not fair. Discuss this viewpoint andsuggest any solutions?

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