What Do Stock Options Mean?

In our lives, we all know that with the development of the economy, more and more people will choose to start a company then is in contact with the stock, so what do stock options mean?

1, What do stock options mean
You can often see that a well-known figure has joined a certain company and the company gives how much annual salary as well as how many stock options, so what do stock options stock options mean? What do stock options mean is that the buyer, after paying the option fee, acquires the right to buy or sell a certain number of relevant shares at an agreed price on or before the expiry date specified in the contract. It is one of the many ways to incentivize employees and falls under the category of long-term incentives. A stock option is a right given by a listed company to senior management and technical personnel of the company to purchase common shares of the company at a pre-agreed price within a certain period of time. Stock options are a new incentive mechanism different from employee shares, which can effectively combine senior corporate talents with their own interests well. The exercise of stock options increases the company's ownership interest. It is the purchase of unissued and outstanding shares by the holder from the company, i.e. directly from the company rather than from the secondary market.

2, What is the difference between options and equity
( i ) Enjoy the rights and interests of different: options: refers to a person granted by the company at any time within a specific period of time can buy or sell an asset at a fixed price; exercise options to enjoy the rights and interests of equity requires the purchase of equity; equity: refers to the shareholders based on its shareholder status and enjoy, from the company to obtain economic benefits, and participate in the management of the company's rights; enjoy the shareholders should be Various rights and interests.

(ii) Different in the exit mechanism: options: options in the exit mechanism than equity in one more whether to exercise; options have a non-linear profit and loss structure; equity: equity in the proposed mechanism whether to redeem, whether to retain the option; equity has non-property and property, divisible, transferable. An option is a right. An option contract involves at least two parties, the buyer and the seller. The holder has the right but not the corresponding obligation. A stock option is a comprehensive right of the shareholders of a limited liability company or a company limited by shares to personal and property interests in the company.

3, Differences between stock options and restricted shares
(i) The symmetry of rights and obligations is different. Stock options are a typical incentive model with asymmetrical rights and obligations, which is determined by the essential attributes of options as financial instruments.

(ii) The symmetry of rewards and penalties is different. As the symmetry of rights and obligations is different, the symmetry of incentives and penalties is also different. Stock options are not punitive in nature.

(iii) Waiting period, lock-up period and other provisions. There is a waiting period (more than one year) after the grant of a stock option into the exercise period.

(iv) The difference between the exercise price and the grant price. The exercise price of stock options is the price determined when the listed company grants stock options to the incentive recipients and the incentive recipients purchase shares of the listed company.