Nowadays, it is not uncommon to implement an option incentive system within the company. Many startups also motivate employees by allocating options. Perhaps many people do n’t know about startup options. Options related content.
What are startup options
The option in a startup company is a contract, and at a certain time, employees have the right to purchase the agreed number of shares at a price agreed by both parties. Under the contract, the company promised to sell / distribute shares to someone at a certain price in installments. Because the price is fixed, as long as the potential value of the company may increase a lot, the options are potentially very valuable. The value is not the same as taking the original shares. Exercise price, exercise period, restrictions on transfers), can be given to anyone multiple times, and the board of directors or shareholders' meeting can be authorized to reserve a certain number of options (that is, how much the company can issue for option purposes), Management then decides to whom within this range, so options have become one of the most common incentives in startups.
How startup options are realized
In the stock market, the stock you get from the company is already available securities, which can be cashed directly at the transaction price in the market; while the options you get from the company are also securities, they cannot be cashed directly. The right to buy a certain stock at a certain price is the exercise price. The difference between options and stocks is that options cannot be realised directly. You need to pay the price of XX yuan per share, buy the stocks in the market, and then realize the cash by selling the stocks. In essence, options are equivalent to rewarding the company's future appreciation to employees, and there is no downside risk. When the stock falls to a certain degree, the stock holder will continue to lose assets, but the price of the option becomes 0. Will drop again.
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