There's another big reason financial planners warn against holding too many options in the same company that employs you. Bad times can hit you doubly hard. If you lose your job in a downsizing, you lose your paycheck. And if you lose your job, you can forfeit your options or have only 60 to 90 days to deal with them. The recent stock market correction and corporate layoffs are now making many employees more aware of what can go wrong with stock options if they're not handled correctly.
Planners say many problems can be averted, however.
Ideally, employees should be exercising the options on a regular schedule, planners said. That permits the sale of some shares one year, some more the next year, and so on, and plowing the proceeds into a nicely diversified portfolio, Sanabria said. And employees need to exercise the options in the way that will give them the most favorable tax treatment, Sanabria warned. Other tax questions hinge on which kind of stock options an employee's company grants. There are two kinds of options, and the employer selects which one to offer.