Startup words, jargon and slang, business english

What are Stock Options?

A stock option gives an employee or investor the right, but not the obligation, to buy or sell a stock at an agreed price and date. It’s an offer to purchase the stock at a pre-defined price stated in the contract, usually in line with the valuation of the company at the given time. That means that in the future the employees have the right to buy shares for a strike price and the company has the obligation to sell shares to them for the strike price, regardless of how much the shares are actually worth in the future.

What does it mean to “exercise stock option”?

When your vesting schedule allows it you can exercise your stock options. This means that you can purchase the defined number of shares from the company stock at a strike price and receive full ownership. Regardless of what the actual market value of the stocks is. Stock options do not oblige you to exercise them but they oblige the company to sell them to you at a strike price.

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