

Ask HN: What are stock options? What should I do with them? - sydesigner

I&#x27;m a recent graduate, and I&#x27;ve just received a job offer for a small, but well established startup. Stock options are part of the renumeration package. What should I understand about them, and how should I go about effectively making best use of them? Also, can anyone recommend any advice on decent books to read to get acquainted with personal finance and budgetting, I&#x27;ve been in school so long, I need to understand how the real world works.<p>Many thanks,
Sydesigner
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skotzko
Good question that most people face and are afraid to ask :)

Here are some resources to check out that have covered this well:

* Rand wrote a great post ([http://moz.com/rand/understanding-stock-options-at-startups-...](http://moz.com/rand/understanding-stock-options-at-startups-and-at-moz/))

* Solid overview: [http://www.danshapiro.com/blog/2010/11/how-much-are-startup-...](http://www.danshapiro.com/blog/2010/11/how-much-are-startup-options-worth/)

* This is a good book that doesn't get enough love ([http://www.amazon.com/Engineers-Silicon-Valley-Startups-eboo...](http://www.amazon.com/Engineers-Silicon-Valley-Startups-ebook/dp/B004Q9U19G))

* Good high-level notes about equity in startups (part of an incredible series, read it all if you can - [http://blakemasters.com/post/21742864570/peter-thiels-cs183-...](http://blakemasters.com/post/21742864570/peter-thiels-cs183-startup-class-6-notes-essay))

* Venture Hacks on the "Option Pool Shuffle": [http://venturehacks.com/articles/option-pool-shuffle](http://venturehacks.com/articles/option-pool-shuffle)

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voldron
Stock options state that you may exercise, essentially invoke, your right to
buy a stock at a given price, also known as a strike price. If you have 100
options at a strike price of $20, you have the right to buy 100 shares at $20
per share regardless of current market value of the stock. Your options also
may be subject to a vesting period. This means that after a given time you are
given a certain amount or percentage of options you may use. For instance if
your 100 options vest over 4 years, you would have 25 options per year that
you are allowed to exercise. Vesting periods can be different so ask your
employer.

Here is an example:

You are given a strike price of $20 per share and decided to exercise your
option. The stock is currently at $30 per share. You are now buying the stock
at $20 per share. You now decide to immediately sell those shares and now make
$10 per share gross profit.

All stock purchases and sale must be done through a broker.

Hope this helps.

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Moral_
>If you have 100 options at a strike price of $20, you have the right to buy
100 shares at $20 per share regardless of current market value of the stock

Not exactly. Maybe this isn't the same thing as an employer stock option. But
a single call option, what I think you're referring to, gives you the right to
buy 100 shares at x strike price. So 100 call options would be 10,000 shares
at x price.

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voldron
That is true for call and put options but employee stock options are not the
same thing. A call or put option as you stated is for 100 shares per option
contract. An employee stock option is the right to buy N number of shares at a
strike price, not in blocks of 100 per contract.

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Moral_
Thanks for the clarification!

