What does Option Spring Loading mean? Read on to discover the definition & meaning of the term Option Spring Loading - to help you better understand the language used in insurance policies.
Option Spring Loading
A practice designed to issue option grants at certain strategic times, as a means of increasing the value of such grants. The first type of option spring-loading occurs when an option is granted just before the announcement of positive corporate news, with the expectation that the news will boost the company's share price and therefore the value of the option grant. The second type of spring-loading is to grant an option immediately after the release of negative news that has already adversely impacted a company's share price. This has the effect of issuing the grant at an artificially low price, from which the stock is expected to bounce back relatively quickly, ultimately increasing the total profit that can be realized when the option grant is exercised.
We hope the you have a better understanding of the meaning of Option Spring Loading.