Hi Martin, It depends. How close are you to retirement? ;-) I think 'Option 2' gives you a hair more equity, (since you are playing with the deferred tax money), but that's probably only of interest in a long term play for value growth. i.e. Leaving it alone versus viewing it as an 'annual bonus' to be cashed in as soon as possible. [Contrarian Ron: Then again, cashing it in as soon as possible leaves you free to reinvest the 15% gain in 'better' opportunities ... ] Personally, I dislike keeping accounting records ... so I usually go with 'option 1' since it's a lot simpler for poor folks like me. Example - play out 'option 2' seven years down the road ... now you want to sell "x" shares. You not only need to prove that all "x" of them are more than 3 years old, but you also have the fun of computing the net gain/loss. Yuck! [The phone company used to have paper worksheets to help you through these calculations.] <warning - sunny optimism ahead> Then again, there should be much better automated tools available today for tracking these kinds of things - so hopefully the choice would be transparant to you and you can pick whichever you like. </warning> Of course, it goes without saying (and I'm sure I'm not the only one here who can attest to this) that one 'Sept 11th' event can tank all of your tech stock holdings at any time ... making the choice somewhat moot. RonL. (Who just cashed out his ESPP shares from a previous employer ... and may have done at least as well stashing the cash under the mattress for the last 8 years.) ;-( Oh well, I'm sure 'the wife' (TM) will find a nice investment property for me to throw the remains into that should do much better ... if I'm nice to her! ;-) -----Original Message----- From: Martin Burns [mailto:martin at easyweb.co.uk] 1) get a 15% discount on the trading price on the day of purchase (ie payday) or the offer price (whichever's the lower), paid out of post-tax income 2) Buy the shares from pre-tax (gross) income at normal trading price and get additional matching shares equivalent to a 15% discount, but there's a lock-in of 3 years before I can really sell them without costing money.