Ray Wollney

Google Employee Stock Options: The Sequel

No it doesn't make your conclusion "simply incorrect" and I certainly did not intend to offend you by that comment. However to compare google or practically any other individual stock to the broad based indexes such as the S&P 500 is like comparing apples and oranges. The SPX, OEX, DJX or any other broad based index have always traded on a much lower volatility than almost all individual stocks. An exception of course was the 87' crash.
My point is that a stock that trades on a volatility of .30 or lower comparatively speaking in my opinion is not that volatile.
You are right when say that this has been a period of low market volatility. It has been low for quite sometime now. That's probably part of the reason why google is not as volatile as it once was. (like many other stocks).
However the stock market in general and individual stocks in particular have had periods of extraordinarily high volatility. And the potential for a volatility "shock" is always there. In fact it is inevitable. When is anybody's guess. But it will happen again. That's the nature of the "beast". So when the volatility in google gets to above .40 I will agree that it is a relatively high volatility stock.
As of today's close (4/26) the implied volatility in the at the money calls and puts in the front month (May) is around .21. Is that a high implied volatility. The answer is no.
Perhaps now is the time to buy the premium in those options. The at the money calls and puts are trading cheap or underpriced if you use a .30. In fact they are very cheap. Not to mention the out of the money put and call verticals which are even cheaper. I actually bought a few today because of that reason. I do think an implied volatility in google of .21 is extremely low.
So when the "beast" raises it's ugly head again then I will agree with you.
Thanks

Google Employee Stock Options: The Sequel

I have read both of your articles and although I agree with most of what you say there a few points that I have a problem with. One is the price the bidders will pay is crucial to determining what the employee receives for the already discounted TSOs he or she is selling. Obviously the bidders are going to pay less than the "fair value". How much less is anybody's guess but they will low balling as much as they can get away with.
Also I don't think TSOs will increase employee retention as being able to sell their TSOs early, even though it may be a small fraction of it's "fair value", might make an employee more apt to leave early as well and look for employment elsewhere where or she might get more ESOs or TSOs from his or her new employer. Unless of course he or she had a reload provision which is highly unlikelly as reloads are usually only available to highe level executives.
I also do not consider Google to be a highly volatile stock. With the implied volatility in the Jan. 09 at the money calls being .28 that to me is not a high volatility. This can be demonstrated with the price action today. The earnings came out and were spectacular according to a lot of analysts. However the stock closed up only 10.83 or slightly more than 2% from yesterday's close. The volatillity in Google is less than GM and much less than Ford which has an implied volatility in the Jan. 09 options of around .45. So to say Google is a highly volatile is simply incorrect. It was in the past but is no longer. That could change of course but who knows? The point is with the implied volatililty at .28 the market is saying that Google is not that volatile. More volatile than GE or Mo, yes. But much less volatile than countless other stocks.
These are probably minor points as both of your articles on the Google TSOs are quite revealing.