RE: dotcalmgone - jvw77What your son is doing with the options is very common. In fact the way the tax laws were (there recently have been a few changes)highly discouraged employees from NOT cashing in immediately. I'm sure you know the implications, but in case everyone doesn't here is an example:
Say your son was granted 10K options at $1 for a period of one year (price of stock was $1 at time of grant). As the end of the year approached in the "high flying company", the stock was at $10 so obviously your son would exercise the option. Would he then hold the stock, or sell it immediately? If he has ANY risk aversion, he would sell immediately. This would trigger an income inclusion of 90K, half of which is taxable, a pretty good source of income as you say, and zero risk even if the stock goes back to $1 the next week. On the other hand, if he held and the stock goes back to $1, and then he sells, you would think he would break even, wouldn't you? Afterall, his cost was $1 and he sold at a $1. But OUCH, the tax man is still looking for tax on half of the 90K income inclusion, and the capital loss triggered by the sale can't be used to offset the inclusion. So your son would have to pay likely $35K in tax for an investment now worth $10K. It gets worse if your son needed a loan to exercise the options.
So you can see why people sell immediately after exercising. In Peyto's case, granting options with a 5 year term is extremely beneficial to management and employees being offered options. They can set on the benefit for an EXTREMELY long time without having to exercise the options.
P.S. Great move by Peyto to list insider trading. This updates the impression I had from the alberta securities site that showed only a large stock sale. I'm buying more.