Stock Options
Definition
Stock Options: Stock options give employees the right to purchase company shares at a fixed price (strike price) after vesting. Options are a common form of equity compensation, allowing employees to benefit from company growth while deferring payment until exercise.
Example Usage
“My options have a $0.50 strike price; if we exit at $10/share, each option is worth $9.50.”
Common Misconceptions
Related Terms
Vesting
Vesting is the process by which employees earn their equity over time. The standard vesting schedule is 4 years with a 1-year cliff, meaning no equity...
Strike Price
Strike price is the price at which an option holder can buy shares. For tax purposes (IRC 409A), the strike price must be at or above fair market valu...
409A Valuation
USAA 409A valuation is an independent appraisal of a private company's common stock fair market value, required by IRS Section 409A. It determines the mi...
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