What is a stock option grant?
Companies use a stock option grant as a way to retain and motivate employees. Upon exercise of the option at a specific below-market price, the profit gained plus ownership of the company stock serve as an incentive for the employee.DefinitionStock option grants are contracts between the company and the employees. The contract grants the employee the right to purchase the company’s stock at a fixed price within a specific time frame. The number of options the employee can exercise depends on the number specified in the option grant.Strike PriceStrike price is the the fixed price that is stated in the option. Employees need to exercise the option grant at the strike price, ideally below the market price, in order to be profitable. The difference between the two prices is the profit for the employee.Vesting ScheduleThere is a vesting schedule, a certain requirement associated with the option grant. This requirement is contingent on the company’s expectation of the employee. Most popular
