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A stock option (also known as an equity option), gives an investor the right, but not the obligation, to buy or sell a stock at an agreed-upon price and date.
In short, a stock option gives you the right to buy company shares at a pre-set price that's hopefully lower than the current share price. In this article, we'll talk about what employer stock options are, how they work, and how to calculate what your stock options might be worth.
Holders of share purchase rights may or may not buy an agreed number of shares of stock at a pre-determined price, but only if they are an existing stockholder. Options, on the other hand, are the right to buy or sell stocks at a pre-set price called the strike price.
Options do have value. Just look at the financial exchanges, where options on stock are bought and sold for large sums of money every second. Yes, the value of option grants is illiquid and, yes, the eventual payoff is contingent on the future performance of the company. But they have value nonetheless.
A stock option provides an employee with the opportunity to purchase a set number of shares of company stock at a certain price within a certain period of time. The price is called the ?grant price? or ?strike price.? This price is usually based on a discounted price of the stock at the time of hire.
A share option agreement is an agreement between the holder of shares and a third party giving one party the right (but not the obligation) to purchase or sell shares at a future date, at an agreed price. If the option is exercised, the other party is obliged to purchase or sell those shares.
Stock option grants are how your company awards stock options. This document usually includes details about: The type of stock options you'll receive (ISOs or NSOs) The number of shares you can purchase. Your strike price.
An options contract is an agreement between two parties to facilitate a potential transaction on an underlying security at a preset price, referred to as the strike price, prior to or on the expiration date.