Some companies may offer a benefit to their employees in the way of a stock option. This is something that is often confusing, so we provide you with the following FAQ which will answer some of the more common questions associated with stock options.
Q: What is the difference between a stock purchase plan and a stock option plan?
A: If your employer offers a stock option, you have the right to purchase that stock at a price which has been predetermined. That price will not vary, even if the fair market value of the stock varies. A stock purchase plan, on the other hand, gives you the right to purchase stock but it is not always at a predetermined discount rate.
Q: Will my stock options expire?
A: In most cases, stock options will expire but the expiration time may vary from one program to another. It is important for you to pay close attention to the expiration dates, because you would not want them to expire or they would be worthless.
Q: Can I use a stock option multiple times?
A: No, once you have used a stock option, you will not be able to use it again.
Q: What if I lose my job?
A: It is important for you to check the rules associated with your stock options. There are typically rules which apply if you leave your job, retire or die.
Q: Do stock options pay dividends?
A: No, you will not receive dividends on any unexercised stock options.
Q: What are blackout dates?
A: There may be times when you are unable to exercise stock options, although it may vary from one plan to another. Blackout dates are often related to the end of the calendar year and the end of the company's fiscal year.
Q: How do I get my proceeds from the stock option sale?
A: This is also something that may vary from one plan to another. In most cases, you can expect to see the proceeds from your stock option sale within a few days. Check with your plan for more information.
Q: What is fair market value for an option?
A: Depending on your plan, the fair market value may differ from one option to another. You should check with your plan for more information.