stock-option

Vocabulary Word

Definition

'Stock-option' grants the right (but not the obligation) to buy a company's shares at a set price within a specified timeframe. Imagine it as a 'reserve now, buy later' deal on a company's ownership.

Examples in Different Contexts

For financial planning, stock options are considered when evaluating an individual's investment portfolio and potential income sources. A financial planner might explain, 'We'll consider your stock options as part of your overall financial strategy, assessing the best time to exercise them for maximum benefit.'

Practice Scenarios

Business

Scenario:

With our annual review approaching, we should consider revising our staff remuneration packages, perhaps something more creative than just an annual bonus.

Response:

Including stock-options as part of the compensation package could be a great way to motivate the team.

Investment

Scenario:

It’s always beneficial to diversify our investment portfolio. Depends upon risk tolerance, we can explore other than traditional stocks and bonds.

Response:

One way to diversify could be buying stock-options. It'd give us the right, but not obligation to acquire shares later.