Exercise Priority helps advisors compare vested, unexercised option grants and identify which grants may deserve attention first.
The score ranges from 0 to 100. A higher score means the option’s current value is mostly intrinsic value a stronger exercise candidate.
The score is based on:
Intrinsic Value / Black-Scholes Option Value × 100
Where:
- Intrinsic value is current share price minus strike price.
- Black-Scholes value estimates the option’s total value using current share price, strike price, volatility, risk-free rate, and time to expiration.
- Time to expiration matters because options with more time remaining usually have more optionality.
- Volatility matters because higher volatility can increase the value of waiting.
Options that are out of the money receive a score of 0 because there is no intrinsic value to exercise. Options without a valid future expiration date also receive a score of 0.
Exercise Priority is a planning signal, not a recommendation by itself. Advisors should consider AMT exposure, cash required to exercise, expiration risk, concentration, liquidity, and the client’s broader tax plan.