Stock options

The right to buy shares later at a price fixed today (the strike price).

Example

10,000 options at a $0.50 strike. If the shares are later worth $5, exercising costs $5,000 for $50,000 of stock.

Important

Options are not shares. They must be exercised, exercising usually costs real money, and there is often a 90-day window after leaving.

Related terms

• Option pool — Shares set aside to grant to future employees.
• Employee equity — Ownership granted to employees, usually as stock options from the option pool, vesting over time.
• Equity — Ownership in the company, usually held as shares.
• Strike price — The fixed price at which an option holder can buy a share.

Lessons that explain it

• Compensation and employee equity — Salary, equity, and how to explain a grant honestly to someone who has never held one. (15 min)

All 176 terms in the Founder glossary