Anabtawi on Spring-loaded Options
Over at Professor Bainbridge’s place, Iman Anabtawi has some thoughts on the granting of “spring-loaded” options, an option granted at a market price that does not incorporate some favorable non-public information, and insider trading laws. The practice is analytically similar to granting a discount option (one with an exercise price below the market price) and is related to backdating (issued retroactively after the information is released). Check it out.
UPDATE: Ribstein responds.