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Module: lib/option_value.py

Values outstanding employee stock options using a dilution-adjusted Black-Scholes model. The resulting value is subtracted from equity in the DCF equity bridge.

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Why dilution adjustment matters

Standard Black-Scholes assumes exercising one option doesn’t affect the stock price. But when employees exercise millions of options, new shares are issued, diluting existing shareholders. The dilution-adjusted model accounts for this by reducing the per-option value based on the ratio of options to total shares.

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Key functions

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option_value(stock_price, strike, maturity, volatility, risk_free, dividend_yield, shares, options_count)

Computes the total value of all outstanding employee options. Parameters:
  • stock_price — current market price per share
  • strike — weighted average exercise price
  • maturity — weighted average years to expiration
  • volatility — annualized stock price volatility (standard deviation)
  • risk_free — risk-free rate
  • dividend_yield — annual dividend yield
  • shares — shares outstanding (basic)
  • options_count — number of options outstanding
Returns: Total option value (float) to subtract from equity.

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dilution_factor(shares, options_count)

Computes the dilution adjustment: shares / (shares + options).

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black_scholes_call(S, K, T, r, sigma, q)

Standard Black-Scholes call option pricing (before dilution adjustment).

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Data source

Option data (count, weighted average strike, weighted average maturity) is extracted automatically during the parse-raw-data-to-filings phase from XBRL tags and saved to options_flag.json in the ticker cache. If no option data is found in XBRL filings, the equity bridge skips the option deduction.