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Stock Option

Definition - What does Stock Option mean?

A stock option is a right or a privilege to buy or sell a stock at a given price later in the future. In the context of the law, corporations commonly offer stock options as payment for their employees. Also, the price must be set at the time that the option is given. The stock price cannot be changed at a later time.

Justipedia explains Stock Option

Stock options are commonly used as financial incentive for employees or executives within the business. They can also be used to try to win over prospective employees for the company. For example, a company may offer a $100,000 salary plus 5,000 stock options to a candidate for a vice-president position. Essentially, stock options allow people to gain equity in the company. Once a person has stock options, it is not mandatory for him or her to sell them at a certain time.

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