My stock options

Most options are granted on publicly traded stock, but it is possible for privately held companies to design similar plans using their own pricing methods. Usually the strike price is equal to the stock's market value at the time the option is granted but not always. It can be lower or higher than that, depending on the type of option.

In the case of options company options, the strike price is often based on the price of shares at the company's options recent funding round. Employees profit if they can sell their stock for more than they paid at exercise. Most stock options have an exercise period of 10 years. This is the maximum amount of time during which the shares may be purchased, or stock option "exercised. With some option grants, all shares vest after just one year.

With most, however, some sort of graduated vesting scheme comes into play: This is known as staggered, or "phased," vesting. Most options are fully vested after the third or fourth year, according to a recent survey by consultants Watson Wyatt Worldwide. Whenever the stock's market value is greater than the option price, the option is said to be "in the money. During times of stock market volatility, a company may reprice its stock, allowing employees to exchange underwater options for ones that are in the money.

It may sound like cheating, but it's perfectly legal. Outside investors, however, generally frown upon the practice -- after all, they have no repricing opportunity when the value of their own shares drops. Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. FactSet Research Systems Inc. Certain market data is the property of Chicago Mercantile Exchange Inc.

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When Should I Exercise my Stock Options?