Stock option is a contract giving its holder the right to purchase or sell the underlying security before a certain point in time for a specified amount of money as outlined by the contract..
It is Having the Rights to purchase a corporation’s stock at a specified price.
Infact There are two definitions of stock options.
1. The right to purchase or sell a stock at a specified price within a stated period. Options are a popular investment medium, offering an opportunity to hedge positions in other securities, to speculate on stocks with relatively little investment, and to capitalize on changes in the market value of options contracts themselves through a variety of options strategies.
2. A form of incentive and remuneration for the staff and/or directors of a company, consisting of assigning the option to subscribe to or buy in the future company shares at a predetermined price
Employee stock options: An employee stock option is a call option on the common stock of a company, issued as a form of non-cash compensation. Restrictions on the option (such as vesting and limited transferability) attempt to align the holder’s interest with those of the business’ shareholders. If the company’s stock rises, holders of options experience a direct financial benefit. This gives employees an incentive to behave in ways that will boost the company’s stock price.
Employee stock options are mostly offered to management as part of their executive compensation package. They are also offered to lower staff, especially by businesses that are not yet profitable. They can also be offered to non-employees: suppliers, consultants, lawyers and promoters for services rendered.
Performance Stock Options are Options that vest if pre-determined performance measures are achieved. The performance goal (revenue growth, stock-price increases…) must be reached for the options to be exercisable or for the vesting to be accelerated