What is better stock options or restricted stock - Benefits - ATC South Africa
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Open your trading account now with the N. Trading options is a mystery for many people.
Many would choose trading spot over options, but once getting into the options — traders get hooked. The variety of choices, with the ability to control all aspects of a trade, properly balancing risks and rewards, welcomes traders to an exciting world where all options are open. There wnat some unique terms in the vanilla options trading world, and one must know them before starting to trade.
There are two types of options:. In order to own an option, the buyer pays the seller an amount called the premium.
When the trader acts as the buyer he pays the premium, and when selling an option he receives it.
The premium is decided by a few factors; the current rate or price of the instrument is the first one. In addition, since options are contracts to trade in the future, there is a time element.
The date on which the option can be exercised is called the expiration dateand the price at which the index options trader buyer can choose to execute is the strike whay. Longer dated options have higher premiums than shorter dated options, much like buying insurance.
Another key factor in determining the premium is the volatility of the underlying instrument.
High volatility increases the price of the option, as higher volatility means there is a greater likelihood of a larger market move that can bring about what is better stock options or restricted stock — potentially even before the option has reached its strike price. A trader can choose to close his option position on any trading day, profiting from a higher premium, whether it has risen due to increased volatility or the market moving his way.
The following table demonstrates the impact on the prices of call and put options, if any of the key factors moves higher:.
When selling options, however, a trader receives the premium upfront into his cash balance, but is exposed to finance forex trading unlimited losses if the market moves against the position, much like the losing side of a spot trade.
To limit this risk, traders can use stoploss orders on options, just like with spot trades.
Alternatively, a trader can buy an option further out of forex trading worldwide money, thus completely limiting his potential exposure. When buying options there is limited risk; the most that can be lost restrictes what was spent on the premium. Once the portion of the share option vests, you have the choice to take all the shares or sell all the shares and get the cash.
If you don't choose within 3 months of the vesting stcok, all the stoxk are sold and you get the cash. Either way, the value on the date of exercise is considered income zero strike options and you are liable for tax options strategies using time decay it.
If you choose to take the shares and sell them at a later date, you would also be liable for CGT or income tax on the return as per normal SARS rules.
As far as I understand, most share schemes work similarly and you can't leave the vested options un-exercised indefinitely. Wbat you will probably end up being liable for income tax on Y every Z months.
Polly Senior Member Mar 14, Joined Nov 7, Messages Is your employer South African? Ya, this is where it gets tricky.
It is likely that the shares that vest in you, or that you become eligible to acquire at nominal zero value, would fall within section 8C of the Income Tax Act. This deals with restricted equity instruments.
If its not restricted, i. I know this sounds confusing and it is, but the bottom line is that the responsibility to pay tax over to SARS, based on teh value of these shares, likely rests with your employer.
In essence, South African tax does not really differentiate between getting cash for the work you do for an employer, vs.
I am assuming you are South African. There are still many unknowns, but this is where I'm leaning given what I know.
Joined Jan 2, Messages 3,
Description:Jul 26, - The South African Revenue Service (SARS) believe that share who have created existing restricted equity schemes in good faith and in.