Stock option

A right for staff to buy company shares at a set price

In detail

Employees are paid with the right to buy the company's shares at a price fixed in advance. If the shares rise, the difference is their gain, which is meant to line up their interests with shareholders'. When the rights are exercised the share count grows and each share is worth slightly less.

Example

With a strike of $1,000 and the stock at $1,500, each option is worth $500.

Related terms

Dilution Shares outstanding Share price

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For learning, not investment advice. Decisions are your own.