Series 79: Employee Stock Options

Employee Stock Options

Employee stock options are another form of equity-based, non-cash compensation that companies use to reward employees. An employee stock option is essentially a call option on the company’s stock. The employee is given a grant of an option to purchase a specific number of shares at a specific price, called the grant price. As with stock appreciation rights, the employer typically establishes a vesting period and an expiration date.

Once the option grant vests, the employee may exercise the option by purchasing the stock at the grant price. Assuming the market price at the time the option is exercised is higher tha