About Employee Stock Options

Working may not always be easy, but it definitely comes with its benefits, including, in many cases, company stock options. If your place of employment offers this option, then you need to understand it and how best to work it to your advantage.    

Basically, when this option is offered, it gives you the right to buy a certain number of shares of company stock at a special price called the grant price within a certain number of years.

This option will have a vesting date, meaning when you can start taking advantage of it, and an expiration date, meaning when your option to use this benefit will no longer be available.

Depending on where you work and what it offers, you may have the option to go with non-qualified stock options or incentive stock options. Both have their own applicable tax rules.

With non-qualified options, for example, taxes will typically be withheld from your proceeds when you exercise your options. This is not usually the case with incentive stock options, however.

If you are confused about the stock options available to you, your employer can provide you with full and detailed information about each option available, how it works, and the rules and restrictions related to it. Going over this information with a financial adviser or other financial professional may also prove helpful.

Keep in mind, of course, that, no matter what you do, you don’t want to have too much company stock or be too dependent on one particular company just in case something goes wrong. Investing a bit in company stock, though, typically isn’t a bad idea, especially since you’ll usually get a special price not available to others outside the company.

You, of course, have to do what’s right for you and your financial situation, but, if available, it’s smart to at least consider these options.