Options Investing: More Than Just Employee Compensation

Stock options aren’t limited to employee compensation but can be publicly traded as well.

A stock option gives an investor the right to buy or sell a stock at an agreed-upon price and expiration date. Shutterstock

You have most likely heard of stock options as part of an employee compensation package. Tech companies and startups are famous for attracting talent with stock options.

In this context, “stock option” refers to employees being granted a number of shares that they can purchase at a market price as part of their overall compensation. The benefit is if the market price goes up, they can exercise their options and enjoy a gain, whereas if it falls, they’re out nothing (they simply forego exercising their options).