Stock option

(redirected from Employee Stock Option Plan)
Also found in: Dictionary, Thesaurus, Legal.
Related to Employee Stock Option Plan: employee stock ownership plan

Stock option

Stock Option

A non-tradeable call option giving an employee at a publicly-traded company the right to buy shares in that company for a certain price. Stock options in this sense are often a part of compensation for major and mid-level executives in large publicly-traded companies. If the share price for the company increases, stock options can be very profitable for the employee. These stock options have certain rules governing when and how the option can be exercised.

stock option

An option to buy or sell a specific number of shares of stock at a fixed price until a specified date. See also call, capped-style option, incentive stock option, put.

Stock option.

A stock option, or equity option, is a contract that gives its buyer the right to buy or sell a specific stock at a preset price during a certain time period.

The exact terms are spelled out in the contract. The same contract obligates the seller, also known as the writer, to meet its terms to buy or sell the stock if the option is exercised. If an option isn't exercised within the set period, it expires.

The buyer pays the seller a premium for the privilege of having the right to exercise, and the seller keeps that premium whether or not the option is exercised. The buyer has the right to sell the contract at any point before expiration, and might choose to sell if the sale provides a profit. The seller has the right to buy an offsetting contract at any time before expiration, ending the obligation to meet the contract's terms.

Stock options are also a form of employee compensation that gives employees -- often corporate executives -- the right to buy shares in the company at a specific price known as the strike price. If the stock price rises, and an employee has a substantial number of options, the rewards can be extremely handsome.

However, if the stock price falls, the options can be worthless. Often, there are time limits governing when employees can exercise their options and when they can sell the stock. These options, unlike equity options, can't be traded among investors.

References in periodicals archive ?
An option plan is categorized as employee stock option plan when it is targeted towards more then ten percent of the total number of employees, after excluding the five top executives of the company.
The IRS rejected a corporation's request to re-elect S status within five years in Letter Ruling 9952072.(65) An S corporation revoked its S election, had the shareholders sell their stock to an employee stock option plan (ESOP) and sought to defer the gain under Sec.
He created an employee stock option plan (ESOP) and sold the parent company, BTW Insurance Co., to his employees for only $3.5 million, a fraction of its value of $34 million in assets.
Finnish mobile communications company Nokia announced on Friday (4 August) that a total of 153,750 shares of Nokia Corporation were subscribed for as of 31 July 2006, based on the company's 2003 employee stock option plan.
In addition, the company offers an employee stock option plan (ESOP), whereby employees can buy stock through payroll deduction up to $25,000 a year, Williams said.
Their divorce judgment ordered Carol to sell all of her MMP stock to William, or, at his election, to MMP or its employee stock option plan. William elected for Carol to sell the stock to MMP.
An IPO in which the dominant shareholder is the company's own employee stock option plan is a rarity.
In mid-June, Guy Gannett Communications told Newspaper Guild Local 128 that its employee stock option plan's bid for a controlling interest in the newspaper group failed to make the second round -- dwarfed by larger bids.
G5 Entertainment AB (STO:G5EN) reported on Wednesday that during February 2018, a total of 33,754 new shares were issued as a result of the subscription of warrants issued under an employee stock option plan .
Finnish mobile communications company Nokia has announced that a total of 938,290 shares of Nokia Corporation were subscribed for as of today (9 May), based on Nokia's 2003 employee stock option plan.
Ron Davis, who identified himself as administrator of the Statco employee stock option plan, sent a letter last week to Edward Whitacre Jr., CEO of Bell's parent company, SBC Communications Inc.
A substantial portion of your net worth consists of interest in your company's retirement, profit-sharing, or employee stock option plan, nonqualified personal retirement plan, deferred compensation, or stock acquired under an employee purchase plan.

Full browser ?