I was given an opportunity to "excersise" some stock options with my company. I have never really dabbled with stock in the past, so I am a little new to this.

The basics: I have 110 options that were granted at a price of $63.11 with the grant date back in Feb 2007. The current price of the stock is $45.26 as of the close of the day yesterday.

To me, it seems like I shouldn't proceed with the options as they are down 33% from what they would cost me.

Would that be correct? I am just making some assumptions here, but really don't know if I am understanding it correctly. I don't see the stock jumping back up to $63 any time soon.

Any help woudl be appreciated.

An option is a right to purchase at a given price. An option at 63$ means that you have the right to buy a share at 63$ at any time. After that, you sell the share at current price.

In your case, you would buy at 63$ (exercising your right to purchase at the "then" price) and sell either now at 45.26$ or later...

So, unless you desperately need capital loss for tax purposes, this is DEFINITELY a wait-to-exercise situation! When you have options at a higher price than the stock's current value, DO NOT exercise. Either let them expire (it costs you nothing) or exercise when you can make a profit on them.

PS: to precisly answer your question: yes, you are correct in your assumption on how it works.

So, in theory, if they get to, lets say $70 a share, I could buy them and sell them within minutes of each other and make a profit (minus brokerage fees of course)? I don't have the nearly $7000 to buy them anyway, but do brokerages allow for the purchase and sale without any money upfront? Meaning that they provide the purchase funds knowing that they are cashing out 2 seconds later?

With options, they normally handle it completely without financing. BTW, it is 6300$ that you would need. And after that, don't forget that you have to pay capital gain taxes on the difference!

You may want to ask the finance people at your company. They frequently have deals with brokers that do it for free or nearly-free as a service to the employees.

Erratum. Just realized it was 110 options. So, 7K it is!