If you use a binomial option-pricing model, this post is for you!
Companies often issue employee stock options at different dates during the year, and with different strike prices. After awhile, the number of classes of “unique” options (differentiated by issue date and strike price, for example) can get quite large.
The binomial model I use, supplied through BVR by Derivative Valuation Associates, is somewhat unforgiving in that you cannot save a set of inputs for use after you log off a session. If you to log on again to redo a calculation, you have to start all over entering the data. This can be a nuisance. (I have suggested to DVA that they incorporate a “save inputs” feature!)
Auditors will allow some simplification of the classes of options, such as weighted-averaging strike prices (by the number of options granted on a given date) or weighted-averaging issue dates (by the number of options with identical strike prices), or both. On the other hand, they may want certain options to be classified and valued separately (such as performance-based versus time options).
Putting it all together, I find it efficient for everyone to set up a master spreadsheet that separately lists all unique options and their features (grant date, exercise price, and time versus performance). I then do sorts and propose simplifying averages of similar options, listed in a separate table that foots to the master. I submit these tables to the client and their auditor before running any model calculations. This really cuts down on inefficient reentry of data!