Attached is a copy of a Form 4 required by the SEC

to be filed by executives of public companies when

buying and selling equity securities of their company.

The attached shows that Steve Jobs exercised

120,000 ESOs to buy Apple stock at $5.75 on

August 13, 2007 that he received 10 years before.

Did he forfeit any "time Premium" back to the

company by a premature exercise? No, there was

no remaining "time premium" when he exercised the

120,000 options. There was just one day before

expiration.

.......................................................................

Did he incur an early tax liability upon premature

exercise ? No, he waited to the last possible moment

to exercise thereby delaying his taxes as long as

possible.

........................................................................

Did he give Apple an early tax deduction by exercising

years early? Of course not.

.........................................................................

Did he advance cash to buy the stock before he was

required? No.

.........................................................................

Did he hedge the risk of holding the ESOs over the

time to expiration?

Although during the time of Jobs departure from Apple,

he was not required to disclose hedging transactions,

there were no apparent sales of calls or purchase of

puts to hedge his options positions.

However, he did do three large tranactions that resulted

in lower risk to his holding speculative options.

He was granted 7.5 options in 2001 with a strike price

below the market, which by its nature reduces risk

that there would be in holding ESOs with a strike price

equal to the fair market value of the stock.

He also made an exchange of 27.5 million options on

pre split shares of Apple for 5 million shares of

restricted stock in 2003. This exchange was a risk

reducing trade because the ESOs were far out-of-

the-money. Effectively he sold out-of-the-money

"time premium" and simultaneously used the

proceeds to buy 5 million restricted shares. In hind

sight, he would have been a whole lot better off by

not making that exchange and perhaps a more

reasoned startegy would have been to exchange

just some of the options for restricted stock.

When those restricted shares vested in 2006, he

disposed of 44% of the shares to pay taxes rather

than borrowing the money for margin.

So, in fact, he did carry out three risk reducing trades

while getting maximum value of his ESOs.

His advisors seem to know their trade, my compliments.

Every holder of ESOs can and should follow the same

principles (although Jobs was accomodated by Apple

in the exchange of ESOs for restricted stock at a

reasonable exchange rate, most companies will not

afford this choice to their employees).

Every person holding ESOs can manage his ESOs

just as efficiently as Jobs did and perhaps moreso.

Hold the ESOs to expiration and hedge along the

way by writing listed calls is the best way to go.

in the money puts could be just as attractive.

Jobs did a variation of that theme and Jobs is a

very smart guy.

Cheers:


John Olagues