If a Stock Option Is "Underwater" What Does That Mean

question 141

Short Answer

If a stock option is "underwater" what does that mean?
The company has experienced flood damage to its facilities and cannot pay off on any stock options.
The federal government has blocked the company from paying off stock options.
The market price of the stock that the option applies to is lower than the option price.
The market price of the stock that the option applies to is higher than the option price.
The person holding the stock option will not exercise it because it would constitute poor public relations (the option is therefore "underwater" and out of sight).

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Definitions:

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