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Help?- Hedging Position on Employee share options
I am hoping someone who knows a lot about options strategies, warrants, CFD's etc can help me with this query...
I am currently holding a significant quantity of employee share options which are performance based - that is they only vest if my company outperforms a predefined selection its peer group companies during the performance vesting period (5 years).
My company is in Resources industry, so share prices have been hit hard by the GFC. Ironically, as my company is a blue chip, with conservative balance sheet etc, it has been hit far less hard than its peers, which has resulted in it significantly outperforming the peer group - so the options are now "in the money", but the official date for measuring the outperformance is August 2011. (end of the 5 year performance period).
My concern is that if/when the GFC impact unwinds, and resources prices/stocks recover strongly then the value of my options will evaporate as the peer group will almost certainly outperform my company. I am not concerned about movement in the other direction (ie further downward price pressures) as my company should continue to outperform and I am only interested in hedging the vesting % not share price decline.
So the question is what hedging strategies might I use to protect from declines in vesting %? - ie return to boom in Resources. Is buying out of the money (cheap) call options on the peer group the only way?
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