Stock Options are the most common form of equity incentive for early-stage startups. A stock option grants the option holder the right to purchase a specific number of shares of the company within a fixed period of time at a fixed “exercise” price, generally following the satisfaction of time-based and/or performance-based service conditions (also known as “vesting”). The value of the shares is the difference between the exercise price and the market value of the underlying stock. The two main variations of stock options are incentive stock options (ISOs) and non-qualified stock options (NSOs).
Glossary