With an 8 year employee stock option at $75 for a stock trading at $100, you can exercise and have $25 to invest (ignoring taxes). Clearly investing in a broad index like S&P500 is less risky than investing in a single security therein, but you will have only $25 to invest vs. your option giving you in effect a $100 stake in the market. If a security in the S&P500 was 100% correlated w/ the index then retaining the option should return much more (if the index and security double over 8 years one would end up with $125 profit with the hold strategy, $50 profit in the early exercise strategy). Rather than a theoretical Black-Sholes calculation, I'm interested in how often historically one would have been better off with one vs. the other. Over 8 years I intuitively feel that the early exercise would lose at least 80% of the time, on average lose badly and rarely win big - over 1 year perhaps losing 60% of the time but with large deviation and winning big quite often. Data?

I think rising inflation will probably effect both investments over 8 years, especially if interest rates were to rise (to tackle inflation).. find a gd 3 year fixed bond and re-invest at maturity