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Discounted Stock Options

The opposite of premium options, discounted stock options have an exercise price below market value at the time of grant. They were often used when cash compensation was deferred by converting it into stock options, or as a way to grant stock options with a built-in gain. These grants now raise concerns about backdated stock options and trigger penalties under Section 409A of the Internal Revenue Code. For more information on discounted stock options, see a detailed FAQ on this website.

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