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Stock Options

An option in which the underlier is the common stock of a corporation, giving the holder the right to buy or sell its stock, at a specified price, by a specific date. It is also called equity option. Stock options from your employer give you the right to buy a specific number of shares of your company's stock during a time and at a price that your employer specifies Both privately and publicly held companies make options available for several reasons:
  • They want to attract and keep good workers.
  • They want their employees to feel like owners or partners in the business.
  • They want to hire skilled workers by offering compensation that goes beyond a salary. This is especially true in start-up companies that want to hold on to as much cash as possible.