Strike price

The fixed price at which an option holder can buy a share.

Example

Options granted at a $0.50 strike when the fair market value was $0.50.

Important

Options granted below fair market value create tax problems for the employee. This is one of the places where you genuinely need an accountant.

Related terms

  • Stock options — The right to buy shares later at a price fixed today (the strike price).
  • Employee equity — Ownership granted to employees, usually as stock options from the option pool, vesting over time.
  • 409A valuation — An independent valuation of a company's common stock, used to set option strike prices in the US.

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