Thepeakinthenonvestedoptionsaround$19reflectsthefact
thatCiscohastradedaroundthatpricefrom 2003 to 2005 and
that mostof theoptions issued during thatperiodare still
nonvested.The optionsthat aredeep out-of-the-moneyare
almost allvested becausethey were issuedin the halcyon
days of high stock prices prior to 2000.
Thereareotherfeaturesthataresharedbyemployeeoptions.
Employeescangenerallynottradeoptions,and theoptions
arethusilliquid.Whenemployeesleaveafirm,theyusually
willbeforcedtoexercisetheiroptions,assumingthattheyare
vested.Inthecaseofamergeroranacquisition,therewillbe
forcedexerciseofalloftheoptionsoutstandingatthetarget
firm.
Accounting for Options