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"it's worth $0 until you exit" Are lottery tickets worth $0 until the drawing happens? No. They are worth $2, or the price you paid for them. Likewise, pre-ex
by abalone 11y ago
"it's worth $0 until you exit"
Are lottery tickets worth $0 until the drawing happens?
No. They are worth $2, or the price you paid for them. Likewise, pre-exit options do have value (as you note), but it is nonsense to simultaneously say they are worth $0.
Maybe the reason this is harder to grok is options don't have an established market price like lottery tickets do. Their early-stage value is simply a negotiation between employer and recruit (note: it's not the strike price). But it's a mistake to conclude that they have no dollar value, yet are worth something, just because negotiating a dollar value is awkward and hard.
- mason55 11y ago> No. They are worth $2, or the price you paid for them. Depends how you're defining worth. The ticket has multiple "worths". The first is probably around $2 which is what you could theoretically sell it to someone else for. The second is the expected value of the payout based on the prizes, odds and number of tickets sold. This worth could be $1 or $1.74 or it could be greater than $2 (think about the case where the prize is really high).
- abalone 11y agoMy point is, none of those "worths" is $0. You cannot simultaneously say something has value but is worth $0 simply because it is illiquid.
- thoman23 11y agoThere is no way you could sell a lottery ticket for the price you paid for it. You could probably sell a $2 lottery ticket for $1...maybe. I know I wouldn't buy it...I would just buy the $2 ticket at the store and avoid the complications of the ownership trail and possible fraud. I know, not exactly your main point.