Executive Compensation Often Comprises Stock Options

question 4

Multiple Choice

Executive compensation often comprises stock options. These options have vesting periods, and may not be exercised for a while. Which of the following actions could help executives mitigate the risk of their stock option grants?

• A) Short call options on a broad market index.
• B) Short call options on a competitor's stock that is highly correlated with the company's own stock.
• C) Short futures on a broad market index.
• D) All of the above.

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Definitions:

Perfectionistic Standards

High or unrealistic standards that one attempts to meet, often leading to stress or feelings of inadequacy.

Intrusive Thoughts

Unwanted, often distressing ideas, images, or impulses that spontaneously enter one's mind.

Anorexia Nervosa

An eating disorder characterized by a low weight, fear of gaining weight, and a strong desire to be thin, resulting in food restriction.

Bulimia

An eating disorder characterized by cycles of binge eating followed by purging, through methods like vomiting or misuse of laxatives, to prevent weight gain.