In the past several months since June 2007 we have

witnessed higher short term historical volatilities

and substantially higher implied volatilities in a

large number of stock options on individual equities.

As any student of the options game knows, higher

historical and implied volatility means higher

"time premiums". So if you hold long term ESOs,

their value has increased because the

"time premiums" have increased.

The result is that if you make premature exercises

now, the value that you will forfeit back to the

company is greater.

This also means that the options that you may have

considered using to hedge your ESOs are trading at

higher premiums.

In addition, the case can not be clearer that you

should not make premature exercises during times

of rising volatility or during rising interest rates.

If long term calls were "written" prior to the recent

rise of implied volatilities, a "writer" may find that

there has been no positive erosion over time or that

the calls are even higher than they were when written.

Just be conscious that the theoretical value of the

ESOs in most cases have risen perhaps even more

than the nearer term listed options.

John Olagues