This paper examines the dynamic investment problem of a risk-averse manager compensated with a call option on the assets he controls. The optimal policy for the manager is such that the option either ends up deep in or deep out of the money, leading to extreme volatility. However, the option compensation does not necessarily lead to greater risk-seeking. In some cases, the manager's optimal volatility is lower than it would be if he were trading his own account. Additionally, giving the manager more options can reduce asset volatility. The paper provides explicit solutions for the optimal trading strategy under different benchmark payoffs and utility functions, showing that the manager dynamically adjusts volatility in response to changes in asset value. The findings suggest that option compensation can have complex effects on managerial risk appetite, and that the manager's behavior depends on the specific characteristics of the compensation scheme.This paper examines the dynamic investment problem of a risk-averse manager compensated with a call option on the assets he controls. The optimal policy for the manager is such that the option either ends up deep in or deep out of the money, leading to extreme volatility. However, the option compensation does not necessarily lead to greater risk-seeking. In some cases, the manager's optimal volatility is lower than it would be if he were trading his own account. Additionally, giving the manager more options can reduce asset volatility. The paper provides explicit solutions for the optimal trading strategy under different benchmark payoffs and utility functions, showing that the manager dynamically adjusts volatility in response to changes in asset value. The findings suggest that option compensation can have complex effects on managerial risk appetite, and that the manager's behavior depends on the specific characteristics of the compensation scheme.