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Exercise-Price Averaging

Basing an exercise price on the average price of the stock during a certain period before the grant (e.g. a 30- or 90-day average). These types of grants have certain drawbacks, as they could result in discounted options if the average were lower than the stock price on the grant date. Most companies grant options with an exercise price that is equal to the fair market value of the stock on the grant date.

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