stock option: meaning, definition, pronunciation and examples
C1Formal, Business, Financial
Quick answer
What does “stock option” mean?
A contract giving the holder the right, but not the obligation, to buy or sell a specific number of shares of a company's stock at a predetermined price within a specified time period.
Audio
Pronunciation
Definition
Meaning and Definition
A contract giving the holder the right, but not the obligation, to buy or sell a specific number of shares of a company's stock at a predetermined price within a specified time period.
In corporate compensation, a benefit granted to employees allowing them to purchase company shares at a set price, often used as an incentive or part of remuneration packages.
Dialectal Variation
British vs American Usage
Differences
Terminology is identical, though 'share option' is a common British synonym. Regulatory frameworks and tax treatment differ between jurisdictions.
Connotations
In both varieties, carries strong associations with finance, corporate culture, executive compensation, and investment strategies.
Frequency
Equally common in both financial and general business contexts in the UK and US.
Grammar
How to Use “stock option” in a Sentence
[Company] granted [Employee] stock options.[Investor] purchased a call stock option.The stock option [verb: expires/vests/is exercised].Vocabulary
Collocations
Examples
Examples of “stock option” in a Sentence
verb
British English
- The scheme allows employees to option shares at a discount.
- He decided to option his vested rights before the tax year ended.
American English
- The company will option shares to its new executives.
- She opted to option her shares immediately upon vesting.
adjective
British English
- The stock-option package was a key part of the negotiation.
- They discussed the new stock-option scheme at the AGM.
American English
- The stock option plan was detailed in the SEC filing.
- He received a stock option grant as part of his signing bonus.
Usage
Meaning in Context
Business
The board approved a new stock option plan to retain top talent.
Academic
The study analysed the correlation between stock option grants and managerial risk-taking.
Everyday
Her job offer included stock options, which could be valuable if the company does well.
Technical
The delta of the long-dated stock option was calculated using the Black-Scholes model.
Vocabulary
Synonyms of “stock option”
Strong
Neutral
Weak
Vocabulary
Antonyms of “stock option”
Watch out
Common Mistakes When Using “stock option”
- Using 'stock option' to mean a choice between different stocks (correct: 'choice of stocks'). Confusing 'exercising an option' with 'selling an option'. Using plural 'stocks option' (incorrect; 'stock' here is a modifier).
FAQ
Frequently Asked Questions
If you do not exercise the option before its expiration date, the contract becomes worthless, and you lose the right to buy or sell the shares at the predetermined price.
No. A stock option gives you the right to buy or sell stock in the future, but you are not a shareholder until you exercise that right and complete the purchase.
Vesting means you have earned the right to exercise the option. Typically, options vest over a period of time (e.g., over four years), meaning you can only exercise a portion of them each year.
A call option gives the holder the right to buy shares at a set price. A put option gives the holder the right to sell shares at a set price. Employee stock options are typically call options.
A contract giving the holder the right, but not the obligation, to buy or sell a specific number of shares of a company's stock at a predetermined price within a specified time period.
Stock option is usually formal, business, financial in register.
Stock option: in British English it is pronounced /stɒk ˈɒpʃən/, and in American English it is pronounced /stɑːk ˈɑːpʃən/. Tap the audio buttons above to hear it.
Phrases
Idioms & Phrases
- “Golden handcuffs (often implemented via stock options)”
- “An option to buy into the company's success”
Learning
Memory Aids
Mnemonic
Think: A STOCK OPTION gives you the OPTION to buy STOCK.
Conceptual Metaphor
A BET ON THE FUTURE (You are betting the stock price will move favorably). A KEY TO OWNERSHIP (It provides a potential key to owning part of the company).
Practice
Quiz
What is the primary characteristic that defines a stock option?