This subreddit is for asking for objective explanations. It is not a repository for any question you may have. LI5 means friendly, simplified and layman-accessible explanations - not responses aimed at literal five-year-olds. Perform a keyword search, you may find good explanations in past threads. You should also consider looking for your question in the FAQ. What does it mean to have "options" as an employee? What does one do with said "options"?

An employee stock option is basically an offer a company makes to allow an employee to buy stock at a set price usually the stock price on the date the options are given.

Obviously, if the market price goes up after the options are issued, you can make money simply by buying the shares and immediately selling them at the market price. If the stock price goes down, you may never exercise your options and you can just let them expire. Startup companies normally pay their employees lower salaries than they could get at an established large company, but give them stock or stock options in the startup company instead.

So if the company does succeed, the stock or options can be worth millions of dollars - look at the early employees of Microsoft, Google, and Facebook who made millions. But if the company fails, you have worthless stock or worthless options - look at the many other late 's Internet companies that flopped. Many large companies also give their executives a relatively lower salary and give them a lot of stock options, instead of just paying the executive millions of dollars automatically.

The idea behind that is that the executive who gets most of his or her pay in options only makes a lot of money if the company does well, so that's a motivating factor for the executive to do a good job - if the company's stock price does badly, the executive's options will be worthless. The difference between stock and stock options is that an option isn't a guarantee of having stock - it gives you the right to buy stock at a certain price, and it has an expiration date.

There are also a couple different types of employee stock options. You have what are called restricted options where upon vesting the employee can buy actual shares.

There are also phantom stock options.

ELI5: What are (stock?) options and how do they work : explainlikeimfive

Upon vesting of phantom options the company pays the employee in cash the difference between the stock price at that date less the option price, and there is no transfer of actual shares. So I could buy stocks with my option, and sell them for more than I paid, or I could sell the option to someone who wanted to buy my company's stock, and make money that way.

Holistic | Define Holistic at nocuwahojopyx.web.fc2.com

Use of this site constitutes acceptance of our User Agreement and Privacy Policy. By signing up, you agree to our Terms and that you have read our Privacy Policy and Content Policy.

Intuit Mint for Windows Phone taken down - Business Insider

Log in or sign up in seconds. Submit a new text post. Before posting Make sure to read the rules. E is for Explain - merely answering a question is not enough. Don't post to argue a point of view. Flair your question after you've submitted it. Category filters Mathematics Economics Culture Biology Chemistry Physics Technology Engineering Other Reset.

Genetics are easy to understand when you have a few fixed outcomes like eye color. How do they work when it is something like height? Why Does Your Breath Smell Bad When You Don't Eat For A Long Time? Why does whacking the remote when it's low battery actually work. How can Robin Williams' will prevents Disney from using his name, taped performances or voice performances or voice recordings for 25 years after his death?

Doesn't Disney own the rights to them? Why do western CEO's not cut their salaries during bad times like most Japanese CEO's and what are the implications of doing so? This is an archived post. You won't be able to vote or comment. A stock option is an option to buy a stock at a certain price. The option has value when the current price of the stock is above the price of your option.

You can buy and sell options the same way as stocks. Posts are automatically archived after 6 months.