What are Stock Options?

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Stock Options definition

A stock options is the right to buy a particular amount of common shares at a fixed price at a future date over a certain period of time. In other words, it provides the option’s owner the capacity to buy stocks for a particular price at a future date irrespective of what the market price is.

How Company is benefited by Stock Options?

Stock options are commonly distributed by the organization or company to their employees but it can be purchased in the open market. Stock Options are mostly given to employees as gratuities for their hard work. Companies give Stock options to employees so that they improve their performance and stay in the company for a long time.

How Employees are benefited by Stock Options?

Stock options also benefit employees because they can make more money from the stock options then their income or wages. Because they can buy the stock options from the company in less price then the market. In addition, the tax code enables staff to defer taxes on this type of compensation so that before they can be exercised, they do not have to pay income tax on the options.

Related: How Stock Options Can Skyrocket Your Wealth ?

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