The Value of Employee Stock Options

Employee stock options are a benefit offered to many employees of various corporations. If your company offers an employee stock option, you will be able to purchase a certain amount of stock at a predetermined price. Here are the basics of employee stock options.

How They Work

The employee can choose to exercise an employee stock option once she reaches a certain point in her employment. She has the right to do this, but she does not necessarily have to do it if she does not want to. If she exercises the stock option, she will be able to purchase shares of stock at the price that was previously determined.

Reasoning

This program is offered as an incentive to keep talented employees. Employees will benefit from these stock options if the price of the company's stock increases. This gives them an incentive to work towards the common goal of increasing the value of the company. If they do this, they are going to be able to receive a nice bonus. They will also want to stay with their current company because of the promise of stock options in the future.

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