Google is to launch an options trading scheme that would protect its workers from a slump in the company's share price.

The US search engine group is planning to introduce a programme that would allow workers to sell their options to a financial institution once they've vested, rather than exercise them.

Options allow Google employees to buy shares at a set price after a set period of time. They are typically granted when an employee joins the company and can act as a valuable incentive for wooing workers from rival groups, such as Microsoft.

The options are said to "vest" when the set period is over. The holder can either hold on to or "exercise" the options. If a holder exercises the options they buy the allotted number of shares at the agreed set price. The employee can then sell the shares or keep them.

Google's shares have soared since it listed on Nasdaq. They floated at $85 in August 2004 but have since risen to just shy of $489 at last night's close.

The rise has proved positive for early Google investors but left the group with a valuation equivalent to 62 times its annual earnings, well above the typical stock market valuation.

Wall Street analysts remain bullish on the stock, with Credit Suisse tipping a $600 price within twelve months. However some analysts reckon the stock could rise by a more cautious ten per cent during the year.

Google's introduction of a transferable options trading scheme will allow employees to make money from their options, even if the market price falls below the price at which the options were granted.

The move could potentially help the company recruit workers going forward, as granting options at a set price below the market price would prove costly.

Were the company to grant options at around the current market price only for the share price to fall, those employee options would be worthless.

Making employees' options tradeable should make them more valuable to employees. The move could create demand for employee options even where the share price falls below the options price.

Google said it had spoken with the Securities and Exchange Commission and would ensure the scheme complies with securities laws.

It said the change would impact the accounting method for employee stock options. However it would, in the short term, increase the amount it recognises as stock-based compensation.

The company is rallying interest from financial institutions for the auction, which will be managed by Morgan Stanley, which helped manage the company's IPO. The programme should be running from the second quarter of 2007.

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