Employee Stock Options: What You Need To Know

Most people are familiar with stock options as a form of long-term compensation for executives at top companies. Because of this, a lot of companies are giving stock options to a lot of their employees right now. Here are some important facts about stock options that you need to know.

1. More and more companies are giving stock options to employees who aren't in the executive suite, as well as to those who are. Offering stock options is a good way to get good employees in the current job market, where top talent is very important.
2. When setting up stock options, keep the following in mind:
3. People still like stock options. This is what the National Center for Employee Ownership says. They say that about 4,000 plans are used by 9 million employees. Ten years ago, there were 1 million people who took part.
4. The number of shares a company is willing to sell
5. Stock options are good for small companies that are expected to grow and for public companies that want to give their employees a stake in the company.

#!? Who will get the choices?

1. The number of future options that can be sold

#! If it's a permanent part of the benefit plan or just a way to get people to work,

2. There are two main kinds of employee stock options. They are called nonqualified stock options and qualified, or incentive, stock options, or ISOs. Most of the time, nonqualified stock options are given to employees, while ISOs, which can get special tax treatment, are mostly given to the top managers.
3. You can exercise stock options in three different ways: by paying cash, by swapping employer stock you already own, or by borrowing money from a stockbroker and selling shares to cover the costs.
4. Stock options should be used in a smart way. If you don't sell them, they can hurt your finances, especially if you have to pay taxes on the money you make. Even if you decide to keep the stock you bought, you still have to pay taxes on it. The trick to getting the most out of stock options is to not try too hard.
5. Just because the ISOs are for the rich doesn't mean that nonqualified plans are the same as regular plans. In fact, unlike ISOs, nonqualified stock options can be sold for less than the stock's market value. The nonqualified options can also be given to children or charities, but only with permission from the employer.
6. You can make the most money from your stock options if you hold on to them until they are about to expire. This lets your stock options go up in value, which means you make more money.