Stock options?

Question

My company is offering it's employees stock options that we have to option to exercise in a few months. My co-workers were saying that the value of the stock will drop when we can exercise the options because of a lot of people selling the options and getting the cash. I think that the stock will go up because since we dont actually have the stock yet, nothing will be lost when the options are sold...plus some people will choose the option to buy the stock. Who's right???

Answer 1

I am an economist and have been a professional investor. Your question cannot be answered. There are too many factors that are unknown. Your coworkers have oversimplified the markets, but you also are ignoring sudden supply.

You should only base your answer on whether or not you want to own this stock because its underlying value makes it a good investment over a long period of time. What happens in the next month really does not matter.

If it does drop from mass selling, you should consider buying more.