Evan's Financial Blog

 

Columbia Pictures

Amanda Peet encourages John Cusack to catch an outbound flight in “2012,” directed by Roland Emmerich from a screenplay he wrote with Harald Kloser.

When the World Hangs in the Balance, a Reliable Calendar Is Needed

 

By MANOHLA DARGIS

Published: November 13, 2009

I know what I have against Roland Emmerich — “The Patriot,” for starters — but what does he have against us? He’s bombarded Earth with alien death rays, big-footed it with a rampaging reptile and put it into deep freeze. Now in “2012,” his latest apocalyptic folly, he cracks the planet like a nut, splitting its crust, toppling its mountains and cities, and laying its every creeping thing to inevitable tedious waste.

Maybe he’s angry. (His last movie, “10,000 B.C.,” was widely panned.) To judge from the similarity with which he stages the multiple disaster sequences in “2012” — a limo, a camper, a plane, a bigger plane and some really big boats, by turns, race ahead of the impending doom — he seems exhausted. It’s no wonder. Finding newish ways to cram large-scale carnage into a PG-13 package is tricky. You need enough verisimilitude to hook the audience, but not enough to freak it out: the collapsing high-rises have to look real enough to be plausible, as do the itty-bitty computer-generated figures falling from them. Swirling dust and flying debris serve that commercial purpose, not rivers of blood and body pulp.

And so the dust swirls in “2012,” and debris and bodies fly, though at a careful distance. It all looks fairly convincing and also familiar: if you don’t repeatedly flash on Sept. 11, Mr. Emmerich will surely be disappointed. That gives the movie a cheap frisson, though the larger shivers are supplied by the onslaught of pricey special effects, which have grown predictably snazzier since his last cataclysm. Alas, the clichés of the disaster narrative remain in place. To that ruinous end, the larger catastrophe in “2012” functions as both the trigger and backdrop for a soap opera about a fractured family, standing in for the rest of humanity, which heals as the world falls apart. That’s the idea, anyway.

In truth, the central family here is as disposable as the billions of computer-generated humans that soon pile up after disaster hits. Written by Mr. Emmerich and Harald Kloser (they last collaborated on “10,000 B.C.”), “2012” takes its plot points and shifting plates from both science and fiction, and its title from doomsday prophesies, including a myth about the end of days derived from a reading of the Mayan calendar. Though not much is made of the Mayan angle, the most amusing character, a doomsday prophet and radio broadcaster played by Woody Harrelson, seems in hair, beard and interests to have been drawn along the predictive lines of the real author Daniel Pinchbeck (“2012: The Return of Quetzalcoatl”).

Mr. Harrelson looks like he’s actually having the kind of good time stupid movies should provide but that this one roundly fails to deliver. Despite the frenetic action scenes, the movie sags, done in by multiple story lines that undercut one another and by the heaviness of its conceit. Humanity is dying, after all, as the television talking heads keep repeating, and while most of the dead are specks on the screen, Mr. Emmerich occasionally brings you close to the calamity. In one scene a musician (George Segal) calls his estranged son, but the phone is answered by the granddaughter he’s never seen. She’s cute, but then her house shakes and she’s gone, vaporized so that a sob can catch in Mr. Segal’s throat and ours.

There’s no time for real tears in movies of this sort, of course, though there’s plenty of space available for synergistic product placement, as evidenced by the Sony Vaio equipment that fills the government offices where the American president (Danny Glover) stoically stands by. Closer to the ground, another patriarch (John Cusack) plays his part as a divorced dad who will be enlisted for the usual heroics, while Amanda Peet rolls her eyes as his embittered ex. Depending on your tolerance for Mr. Cusack’s mugging, she has traded up or down by landing a plastic surgeon (Tom McCarthy). Completing this family portrait are two irritating children, a preadolescent boy (Liam James) and a younger girl (Morgan Lily).

Chiwetel Ejiofor, as some sort of wizard scientist, gets the chance to say “My. God.” several times in a credible American accent while the less-fortunate Oliver Platt plays a sleazy politician who’s equal parts devil and ham. Thandie Newton shows up as the president’s daughter who, because movies like these subscribe to the Noah’s ark theory of onscreen hookups (two of every kind), becomes an eventual romantic foil for Mr. Ejiofor’s character. Somewhere in the Himalayas a young Tibetan monk (Osric Chau) ponders the mysteries of life as his brother (Chin Han) heads off on a secret mission in China where salvation waits onscreen and, presumably, in that country’s contribution to the movie’s global box-office take.

“2012” is rated PG-13 (Parents strongly cautioned). Old Testament-style destruction served with a smile.

2012

Opens on Friday nationwide.

Directed by Roland Emmerich; written by Mr. Emmerich and Harald Kloser; director of photography, Dean Semler; edited by David Brenner and Peter S. Elliot; music by Mr. Kloser and Thomas Wander; visual-effects supervisors, Volker Engel and Marc Weigert; production designer, Barry Chusid; produced by Mr. Kloser, Mark Gordon and Larry Franco; released by Columbia Pictures. Running time: 2 hours 38 minutes.

WITH: John Cusack (Jackson Curtis), Chiwetel Ejiofor (Adrian Helmsley), Amanda Peet (Kate Curtis), Oliver Platt (Carl Anheuser), Thandie Newton (Laura Wilson), Danny Glover (President Thomas Wilson), Woody Harrelson (Charlie Frost), George Segal (Tony Delgatto), Tom McCarthy (Gordon Silberman), Liam James (Noah Curtis), Morgan Lily (Lilly Curtis), Chin Han (Tenzin) and Osric Chau (Nima).

2012, China, introduction, movie

Stock options provide advanced investors with additional opportunities for potentially rewarding returns. But stock options do possess risks that require an in-depth understanding of how they work. This article provides a basic overview of stock options.

An Introduction to Stock Options

Options on stocks and stock indexes are derivative instruments. Stock investors may use stock options to hedge against a price decline, to lock in a future purchase price, or to speculate on the future price of a stock. Employees may also receive stock options through an employee compensation plan. For employees, stock options represent the potential for growth in value and the possibility that the increase in value will be taxed at a favorable capital-gains tax rate.

The Basics of Stock Options

A stock option is essentially a contract that gives one party the right to purchase or sell a stated number of shares of a stock at a specified price. The price at which the shares may be purchased or sold is known as the strike or exercise price. The right to exercise lasts for a stated period of time, which may be months or years, until the expiration date. If not exercised on or before the expiration date, the option expires.

Options come in two forms: calls and puts. A call option gives the option purchaser the right to buy the underlying stock. A put option gives the option purchaser the right to sell the underlying stock.

A call option is valuable to the extent that the exercise price is below the market value of the underlying stock. For example, if a stock is trading at $100 per share and you hold a call option entitling you to buy the stock at $72 per share, your option has an immediate value to you of $100 – $72 = $28, before taking into account any tax consequences or transaction fees.

A put option is the mirror image of a call option. A put option becomes more valuable as the price of the stock moves below the exercise price. For example, if you have purchased a put option with a strike price of $90 and the stock price moves to $80, you may choose to exercise the option and sell the underlying stock at $90 for an immediate unrealized per share gain of $90 – $80 = $10.

With both calls and puts, the purchaser of the option has the right to exercise, while the option seller is obligated to respond if the option is exercised. The option purchaser pays an upfront fee known as the premium to the option seller in return for the right of exercise. The option buyer has a known investment risk — if the option expires unexercised, the purchaser of the option recognizes the premium paid as a loss. Conversely, the option seller undertakes potentially unlimited market risk in return for the premium received.

Components of an Option’s Value

Option contracts are traded on regulated markets, and their values may fluctuate throughout the trading day. The price of an option at any given time is based on several factors, including the current price of the underlying stock, the price volatility of the underlying stock, the time to maturity, and interest rates.

Intrinsic value — the intrinsic value of the option is the difference between the exercise price and the price of the underlying security. An option is "in the money" when the intrinsic value is positive.

Volatility — part of an option’s value reflects the volatility of the underlying security. If a stock price is highly volatile, there is a relatively greater chance that the option will be "in the money" at expiration, and therefore, the option will carry a higher premium than an option on a less a volatile stock.

Time value — the more time remaining until the expiration date of the option, the greater the potential for a significant change to occur in the price of the underlying security and the greater the value of the option. Time value diminishes as the expiration date of the option approaches.

Interest rates — the option premium is a cash payment that can be invested by the option seller to generate interest income. Higher interest rates present opportunities for potentially greater earnings on the option premium.

Intrinsic value, volatility, and time value can significantly affect an option’s market value. An option with an exercise price above the current market value of the underlying security may still have considerable potential value.

For example, if you hold a call option with an exercise price of $72 and the current share price is $65, your option would generate a loss if it were exercised today. However, as stated above, option contracts typically are valid for months or years, until the stated expiration date. The time value of the call option is the potential that the share price will rise over time and eventually exceed the option exercise price.

Employee Stock Options

Employee stock options are call options granted by an employer as part of an employee compensation plan. There are two main types of employee stock options: incentive stock options and nonqualified stock options. Incentive stock options offer special income tax benefits to the employee.

An incentive stock option (ISO) must meet a number of criteria to qualify for favorable tax treatment. As long as the shares acquired through an ISO are held for at least one year following exercise and are not disposed of until at least two years after the option is granted, the difference between the option price and the sale price is taxed as a long-term gain. The tax is applied at the sale of the stock. If you don’t meet the one-year holding-period requirement, the transaction is considered a "disqualifying disposition" and your gains are taxed as ordinary income.

A nonqualified stock option (NSO) is an option that doesn’t meet the ISO criteria. Gains on NSOs are taxed as ordinary income at the time of exercise.

OPTION TERMINOLOGY

Call option
An option that gives the option buyer the right to purchase the underlying security.

Exercise date
The date by which the option must be exercised.

Expiration date
The date that the option will expire (same as the exercise date).

Intrinsic value
The difference between the strike price and the current price of the underlying security.

Premium
An upfront fee paid by the option buyer to the option seller.

Put option
An option that gives the option buyer the right to sell the underlying security.

Strike price
The stated price at which the underlying security can be purchased or sold (also called the exercise price).

Time value
The component of an option’s price that reflects the time left to expiration.

Volatility
The tendency of the underlying security to fluctuate in price.

Consider Option Strategies Carefully

Options are leveraged investments that can offer significant potential advantages and risks. As part of an overall investment strategy, put and call options may offer opportunities to temporarily alter the risk/return characteristics of a portfolio. Before investing in options, it is important to thoroughly understand the potential risks and benefits. You should consult a qualified tax advisor as to how option transactions may affect your tax situation. If you are an employee and have received stock options as employee compensation, you will want to carefully consider how exercise of your options may affect your cash flow and tax liability.

Summary

• An option is a contract entitling the option purchaser to buy or sell the underlying stock at the stated exercise price. A call option gives the holder the right to buy the underlying stock; a put option gives the holder the right to sell the underlying stock.
• The option purchaser’s risk on the option is limited to the premium paid; the option seller’s risk on the option is potentially unlimited.
• A call option is valuable to the extent that the exercise price is below the market value of the underlying stock at the time you choose to exercise the option by buying shares. The time value of the option is the potential that the share price will rise over time and eventually exceed the option exercise price.
• Employee stock options may be tax-qualified incentive stock options (ISOs) or nonqualified stock options (NSOs). If shares acquired through an ISO are held for at least one year following exercise and are not disposed of until at least two years after the option is granted, the difference between the option price and the sale price is taxed as a long-term gain. If you don’t meet the one-year holding-period requirement, the transaction is considered a disqualifying disposition and your gains are taxed as ordinary income.
• Before implementing an investment strategy using options or before entering into any equity arrangements with an employer, consult your tax advisor.

Checklist

• Check the current share prices of the stocks associated with your stock options.
• Confirm that you’ve met holding-period requirements before using employee stock options in order to qualify for more favorable tax treatment.
• Conduct a comprehensive investment portfolio review to make sure that your options are part of a well-diversified overall asset allocation.
• Consider meeting with a tax advisor or financial professional to understand how your options could affect your tax and investment strategies.

basic knowledge, finance, introduction, risk, stock market, stock option, stock options