Stock Option Agreement

About Stock Option Agreements When a company offers employees stock options, they do so through a special contract called a stock option agreement.The option agreement dictates all the terms of the offer -- including vesting schedule, time limits for exercise once vested and any other special conditions.

RSUs are generally always worth something versus stock options, which can expire worthless if the stock price is below the strike price. Additionally, with RSUs you don't have to come up with the cash to exercise the options if your company doesn't offer some sort of cashless exercise option.

You Could Make a Lot of Money with Stock Options (But There's No Guarantee) Think of a start-up company that gives you 100,000 company stock options with a strike price of $1 per share. At issue, they probably won't be worth much.If that happened, the value of the stock options would go from nothing to $9,900,000.

Stock options are only valuable if the market value of the stock is higher than the grant price at some point in the vesting period. Otherwise, you're paying more for the shares than you could in theory sell them for. RSUs, meanwhile, are pure gain, as you don't have to pay for them.

A stock option is the right to buy a specific number of shares of company stock at a pre-set price, known as the exercise or strike price, for a fixed period of time, usually following a predetermined waiting period, called the vesting period. Most vesting periods span follow three to five years, with a certain

Stock options are a form of compensation. Companies can grant them to employees, contractors, consultants and investors. These options, which are contracts, give an employee the right to buy or exercise a set number of shares of the company stock at a pre-set price, also known as the grant price.

It may sound complicated, but accepting your stock grant should be a no-brainer for anyone who's starting at a new company. It's low-risk and can provide measurable benefits down the road. To get started on the ins and outs of stock options, check out part 1 of our series Equity 101: Startup Employee Stock Options.

It's free and you're not obligated to purchase your options Just because you accepted your stock grant doesn't mean you actually have to purchase your shares. You're not making any kind of financial agreementrather, you're just agreeing to have the ability to purchase shares of stock in the future.