Stock option

Also found in: Dictionary, Thesaurus, Legal, Encyclopedia, Wikipedia.

Stock option

Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
(3) Number of the stock options granted and number of eligible persons:
The share subscription period for stock options 2013B has expired on 30 April 2019, while the share subscription period for stock options 2013C started on 1 May 2018 and will end on 30 April 2020 and the share subscription period for stock options 2016A started on 1 May 2019 and will end on 30 April 2021.
EXHIBIT 2 Summary of High-Profile Stock Option Exchanges/Repricings Company Date of Incremental Stock Price Year Repricing/Exchange Compensation before Repricing Charges Cardinal Health June 23, 2009 Not Material $30.47 Domino's Pizza April 28, 2009 $1,300,000 $12.69 Ebay August 10, 2009 Not Material $26.36 Electronic Arts October 21, 2009 $70,000,000 $28.18 Google January 22, 2009 $460,000,000 $584.35 Intel September 28, 2009 Not Material $18.41 Motorola May 14, 2009 Not Material $9.67 Starbucks March 18, 2009 Not Material $18.24 Company Stock Price Type of Program Executive or at Repricing Board Participation Allowed?
we analyze the characteristics of the firms using stock options. For this purpose, we describe the dependent variable as the "stock option plan in effect."
123(R) goes beyond selecting a method to value employee stock options. CPAs also must help companies make the necessary tax accounting adjustments to properly track the tax benefits from stock-based compensation.
The fair value method requires an issuer to recognize compensation for employee stock options as employees perform services to earn those options.
Lang, 1996, "Employee Stock Option Exercises--An Empirical-Analysis", Journal of Accounting and Economics, 21:5-43
Angus noted that proposed regulations have been released that would require companies to include stock-based compensation and stock options in the pool of shared costs charged to the participants in a cost-sharing arrangement.
However, companies often launch stock repurchase plans to mitigate dilution and satisfy their stock option plan obligations.
Karyopharm Therapeutics announced that the Compensation Committee of Karyopharm's Board of Directors granted stock options to purchase an aggregate of 39,000 shares of Karyopharm's common stock to five newly-hired employees, with a grant date of August 30, 2019.