Joseph P Kelly

US Patent:

7337141, Feb 26, 2008

Filed:

Apr 19, 2002

Appl. No.:

10/126756

Inventors:

Colleen Sullivan - Chicago IL, US
Joseph Klein - Chicago IL, US
Joseph Kelly - Seattle WA, US

Assignee:

iOptions - Chicago IL

International Classification:

G06Q 40/00

US Classification:

705 37, 705 36 R, 705 36 T

Abstract:

An efficient process, from both a regulatory and tax perspective, for individuals to hedge employee stock options. No margin is required for a listed call option written on an equity security when the account holds a “long” position in a vested employee stock option which can be immediately exercised without restriction (not including the payment of money) to purchase an equal or greater quantity of the security underlying the listed option provided that the vested employee stock option does not expire before the short listed call option, and provided that the amount (if any) by which the exercise price of the vested employee stock option exceeds the exercise price of the short listed call option is held in or deposited to the account.

US Patent:

20080147572, Jun 19, 2008

Filed:

Feb 25, 2008

Appl. No.:

12/037017

Inventors:

Colleen Sullivan - Chicago IL, US
Joseph Klein - Chicago IL, US
Joseph Kelly - Seattle WA, US

Assignee:

iOptions - Chicago IL

International Classification:

G06Q 90/00

US Classification:

705500

Abstract:

The present disclosure creates an efficient process, from both a regulatory and tax perspective, for individuals to hedge employee stock options. First, the present disclosure provides that no margin is required for a listed call option written on an equity security when the account holds a “long” position in a vested employee stock option which can be immediately exercised without restriction (not including the payment of money) to purchase an equal or greater quantity of the security underlying the listed option provided that the vested employee stock option does not expire before the short listed call option, and provided that the amount (if any) by which the exercise price of the vested employee stock option exceeds the exercise price of the short listed call option is held in or deposited to the account. Second, the present disclosure makes it possible to treat the return on a listed option or over-the-counter option hedge of vested or unvested employee stock options as ordinary instead of capital, thus avoiding the mismatch with the employee stock options' ordinary return and the potential capital loss on the listed option or over-the-counter option hedge. This disclosure treats any losses arising on a closing transaction with respect to the short listed call option as ordinary losses, provided the optionee makes a valid hedging election pursuant to Internal Revenue Code Section 1221(a)(7).