Exercising Stock Options
A stock option plan is an agreement to issue stock to employees according to specified terms.
Under some plans, the option to purchase stock applies to all employees equally, and the stock is purchased at a price close to its market value at the time of purchase.
In other cases, the stock option plan may give an employee an option to purchase stock in the future at a fixed price.
- Usually offered only to management.
- May be motivational because the market value of a company’s stock is tied to its performance.