Definition
Contracts that give you the right to buy or sell a stock at a predetermined price before a specific date, often used as part of employee compensation.
What to consider
- Understand the terms before you exercise your options.
- Plan the timing carefully to maximize your benefit.
- Consider how they fit into your overall compensation package.
Real world scenarios
- Working at a startup, Lauren receives stock options as part of her compensation. If the company grows, she can buy shares at a lower strike price.
- Derek times his option exercise after a strong earnings report, aiming to profit from an anticipated stock price uptick.
- When the market dips, employees like Tori may wait to exercise options, hoping share prices rebound before making a final decision.
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