STOCK OPTION Meaning and
Definition
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A stock option refers to a financial instrument that provides an individual or entity with the right, but not the obligation, to purchase or sell a specific number of shares of a company's stock at a predetermined price within a specified time period. Stock options are typically granted to employees as part of their compensation packages, especially in publicly traded companies or startups. However, they can also be given to other individuals, such as consultants or board members.
The predetermined price at which the stock can be bought or sold is known as the exercise price or strike price. The specified time period within which the option can be exercised is known as the exercise period or expiration date.
When an employee exercises their stock options, they effectively purchase the shares at the pre-determined price, allowing them to benefit from any increase in value. Conversely, if the share price falls below the exercise price, they may choose not to exercise the options as it would not be financially beneficial.
Stock options can be an attractive compensation tool as they allow employees to potentially participate in the company's growth and profitability. Additionally, they can serve as an incentive for employees to remain with the company over the long term. However, the value of stock options is subject to market fluctuations and can be influenced by various factors, including the financial performance of the company and overall market conditions.
Common Misspellings for STOCK OPTION
- atock option
- ztock option
- xtock option
- dtock option
- etock option
- wtock option
- srock option
- sfock option
- sgock option
- syock option
- s6ock option
- s5ock option
- stick option
- stkck option
- stlck option
- stpck option
- st0ck option
- st9ck option
- stoxk option
Etymology of STOCK OPTION
The word "stock option" consists of two parts:
1. Stock: The term "stock" refers to shares or ownership in a company. It originates from the Old English word "stoc", which means "trunk of a tree" or "log". In medieval times, traders used to gather in designated areas where a "stock" of goods was kept. Over time, the word came to represent a piece or share of ownership in a business.
2. Option: The term "option" comes from the Latin word "optio", which means "choice" or "selection". In finance, an option refers to a contract that provides the holder the right but not the obligation to buy or sell a specific asset (in this case, stocks) at a predetermined price within a specified period.
When combined, "stock option" refers to the choice or right given to an individual to buy or sell shares in a company.
Similar spelling words for STOCK OPTION
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