How do stock options work?

[boiler717]

I’ve been in contact with a recruit about a position, and he mentioned a significant amount of stock options. How exactly do stock options work? I’ve never received as part of compensation.

[boiler717]

Dec 5, 2019 21:56:32 GMT -5 goldengirlz said:

Depends.

Can you give us more info?

For example, a publicly-traded company will have different options than one that is pre-IPO. I can answer questions about RSUs but that’s the only type I know about.

I don’t know a ton about it since I’m still pretty early. It is publicly-traded. I was quoted $50-60k in stock options annually. I assume that means not that much in additional compensation but rather the ability to buy $50-60k of stock and the compensation would be the price difference between the option price and current selling? But I have no idea how to guess how much additional compensation that would potentially provide.

[lolalolalola]

Dec 6, 2019 6:48:27 GMT -5 boiler717 said:

Dec 5, 2019 21:56:32 GMT -5 goldengirlz said:

Depends.

Can you give us more info?

For example, a publicly-traded company will have different options than one that is pre-IPO. I can answer questions about RSUs but that’s the only type I know about.

I don’t know a ton about it since I’m still pretty early. It is publicly-traded. I was quoted $50-60k in stock options annually. I assume that means not that much in additional compensation but rather the ability to buy $50-60k of stock and the compensation would be the price difference between the option price and current selling? But I have no idea how to guess how much additional compensation that would potentially provide.

that’s how it’s worked at my company. I get a much smaller amount of stock option annually.

This is how they work in my company:
They’re always valued at Dec 31 price.
So for example, if I get $10k in stock options and my stock is trading at $20 on December 31. I’ll get 500 options with a call price of $20.00.
In my company they’re a 3 year vesting period.

[k3am]

My options (public) were priced the day I started and had a 4 year total vest period, but they vested daily. As far as I understand, if I want to do anything with them or ever realize the value of them, I have to bring cash to the table and outright buy the shares, then can chose to hold or sell. I keep a spreadsheet of the original price, current price, and what the net value is, but it's basically fake money to me at this point.

My old company and DH's current company were stock grants. Mine had a 5 year vest, and I was granted more on an annual basis. But they were worth 0 to me until vested. The stock I sold, I took a tax hit, but still made money. When I left the company, I left well over 6 figures of unvested grants behind and that was painful (but still worth it).

DH's company is a well known publicly traded company - his stock vests over 3-4 years (I think? I forget), and its in semi-annual increments. He'll also get a stock refresh every year, so every year, they'll give him more, and it will have a new vesting period. If we sell, we'll try to hold it for at least a year before doing so.

Also keep in mind what kind of public company the company is. In my line of business, I finance a lot of "public" companies that shouldn't be public or are constantly on the brink of being delisted our downlisted, in which case, you'd have difficulty selling your shares to realize value. Stock options in a NYSE traded company are not going to have the same upside an OTC pink traded company. (This is hopefully not the case for you.)

[k3am]

Also, since I got tagged and reread what I wrote.. I got it ass backwards. OTC pinks are NOT likely going to have an upside or play out well for you in the end. You are MUCH more likely to see a reasonable/stable value in a stock that trades on the NYSE than one that trades OTC pink. Although an OTC pink traded company has the potential of getting you a huge amount of money in the very rare circumstance that EVERYTHING works out in your favor.

[boiler717]

Dec 6, 2019 17:20:59 GMT -5 k3am said:

Also, since I got tagged and reread what I wrote.. I got it ass backwards. OTC pinks are NOT likely going to have an upside or play out well for you in the end. You are MUCH more likely to see a reasonable/stable value in a stock that trades on the NYSE than one that trades OTC pink. Although an OTC pink traded company has the potential of getting you a huge amount of money in the very rare circumstance that EVERYTHING works out in your favor.

Thanks! It’s a NYSE stock, very established company

[niq]

I don't have any advice (I've only ever gotten RSU grants), but congratulations!