please mr cook, can i have a dividend?, page-17

Sassy, I think of it this way.

1000 Options granted at $0.50, Share price = $1, Intrinsic Valuation = $2.

So the option holder outlays 500 for the options, yet immediately the holding is worth $1000 on the market. When the share buyback initiates, lets say its increase share price by 25 cents (due to the value that is added). The option holder will gain 25% in this scenario, but so too would any ordinary shareholder who purchased at $1.

The fact that an option holder gets to enter at a lower level is irrelevant when you examine the benefits of a share buyback in isolation. The option holder's benefit comes from the discount at purchase, but after purchase his holding benefits the same % as any ordinary shareholder.