What is employees stock option

Answer 1

An employee stock option is a financial instrument offered by a company to its employees, granting them the right to purchase a specific number of shares of the company's stock at a predetermined price within a specified time period. This option is usually granted as part of an employee's compensation package or as a form of incentive to retain and motivate key employees.

Employees typically receive stock options as a way to align their interests with those of the company and its shareholders. If the company's stock price increases over time, employees can exercise their options to purchase shares at the predetermined price (known as the strike price) and then sell them at the higher market price, thereby making a profit.

The terms and conditions of employee stock options vary from company to company, including the vesting period (the time an employee must wait before exercising their options), the exercise price, and the expiration period. It is important for employees to review and understand the terms of their stock options to maximize their potential benefits.