how to calculate overhang
the simplest way to calculate options overhang is to add up existing and future option issues divided by the total number of stock outstanding for example suppose a company has already issued 50 000 options and has plans to distribute 50 000 more assuming that the company has 1 million shares outstanding then the total overhang is 50 000 50 000 1 000 000 10 used in the broad sense market overhang can refer to any situation where investors hold back from an asset due to uncertainties about the near future special considerationsaccording to a 2020 study by executive compensation consultant f w cook co small cap companies grant a significantly higher percentage of their stock options to executives as compared to large cap companies technology companies also have the lowest share of awards granted to senior management while the retail and industrial sectors have the highest 1because an options overhang can have a negative effect on the price of a stock entrepreneurs and company management generally devise hr strategies to mitigate its impact performance based options are one such strategy the chances are lower that an employee will exercise performance based options versus traditional stock options that are not tied to performance and are almost certain to be exercised once their vesting period is over 