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Basics

Learn core knowledge about stock grants. Browse an overview of this section below, or explore the subtopics to the left. This section covers basic concepts that apply not just to stock options but also to restricted stock and restricted stock units. See also the Tax Center for special sections just on the tax basics of various equity grants.

Test Your KnowledgeTest and improve your knowledge with our Basics Of Stock Grants quiz and its study guide in the answer key.


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Stock Option Fundamentals (Part 1): Know Your Goals And Terms

Marilyn Renninger
Stock options aren't just for the folks on mahogany row any more. But turning stock options into the real green stuff takes some know-how. You need to know certain features of your grant to decide when to exercise your options and sell the stock.

How To Avoid The Most Common Stock Option Mistakes (Part 1)

Beth Walker
Avoid the mistakes others made during prior ups and downs in the stock markets. Common mistakes arise in nine different situations, including termination, mergers, financial planning, term expiration, and life events.

How To Avoid The Most Common Stock Option Mistakes (Part 2) This is premium content

Beth Walker
Avoid the errors that many people have made, including mistakes that stem from major life events and taxes.

Stomach Volatility In Your Company's Stock Without Losing Your Mind

Joanna Glasner and Bruce Brumberg
Don't be discouraged by stock market volatility and underwater stock options. As the experts note, stock grants are tools for building wealth in the long term.

Stockbrokers' Secrets (Part 4): What I Tell My Best Clients About Down-Market Strategy This is premium content

W.E.B. Bantling
Market declines rattle even the most experienced stock option veterans (and their advisors). If you are less than fully prepared to cope with the emotional toll caused by an uncertain market, consider these 10 topics.

Stock Option Valuation And Your Exercise Strategy This is premium content

Samuel D. Swisher
When should you exercise nonqualified stock options? You need a decision-making process that removes guesswork and emotions. Otherwise, you're likely to exercise too soon or too late.

Better Late Than Never: Stock Option Strategy For The Market Upturn This is premium content

Michael Beriss
The stock markets will one day rise again. When they do, question the urge to exercise your options for quick profits as soon as possible: exercising too early can be a big mistake.

What Are My Stock Options Worth? This is premium content

Richard Friedman
Your company just gave you a stock option grant, or your existing options are underwater. You wonder: "What are my stock options worth? Are they worth anything at all?" Learn about different valuation methods, including Black-Scholes.

How Does Your Company's Stock Plan Compare? (Part 1) This is premium content

Kate Victory
UPDATED! How typical are your grants of stock options or restricted stock? Compare their terms and provisions with the results of the NASPP's Domestic Stock Plan Design & Administration Survey.

Stock Option Fundamentals (Part 3): Income Taxes And Withholding This is premium content

Marilyn Renninger
Here's some advice for financial fitness: take stock of taxes before you exercise! When and how you exercise your stock options can have a major impact on how much tax and which taxes you'll pay.

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What is a vesting schedule?


A vesting schedule dictates when you may exercise your stock options or when the forfeiture restrictions lapse on restricted stock. A schedule is time-based if you must...

How is my stock grant's exercise price set? This is premium content


The full board of directors, the compensation committee, or an executive with expressly delegated authority...

Why is vesting important to me?


Unless you complete the required service period of work at your company or reach the performance target...

How is fair market value (FMV) determined for setting my exercise price? What are common company practices? This is premium content


In most cases, your exercise price for stock options is...

What is a typical vesting schedule? This is premium content


Graded vesting is more common than cliff vesting...

How are vesting schedules established? This is premium content


Vesting schedules are either established in advance by the board of directors when it approves the...

Other than paying the exercise price, what else must I do to exercise an option?


The specific steps vary among companies. You usually first need to make an irrevocable election to exercise...

If my options are vested and have not expired or been forfeited, can my company prevent me from exercising them? This is premium content


Perhaps. Your stock plan or grant agreement may provide that the company can refuse to allow exercises if...

Are there different types of time-based vesting schedules? Which are most common? This is premium content


Yes. Vesting schedules provide for either "cliff" vesting or "graded" vesting...

Is my employer required by law to give me choices in how I exercise my options? What are the most common methods? This is premium content


No. Your company has full discretion...

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Core Concepts   
Benefits   
Grants   
Vesting   
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Sales   
Valuation & Expensing   
Alternatives   
Underwater Options   

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