Options Trading Tutorial

starbucks employee stock options?

I hear if you work for Starbucks they give you stock options. Can someone explain?

Public Comments

1. I can't confirm if Starbucks gives out stock options or which employees receive them. However, employee stock options generally work as follows. An option is the right but not the obligation to purchase stock at a predetermined price (called the "strike price"). There is a waiting period (the vesting period) until the options can be exercised (cashed in). Let's say that you are given 1,000 options on company stock with a strike price of $10. The vesting period is now over and the market price of the company stock is $20. You have three options. a). Exercise the options. You can buy 1,000 shares of company stock for $10 per share less commission. The stock is worth $20 on the open market, so you have 1,000 shares with an instant profit of $10 per share. b). Do a). above and immediately sell the shares. You now have a cash profit of $10,000 less commission (1,000 shares times a profit of $10 per share). c). Do nothing and hope that the stock price goes up further. Of course, it could go down as well. If the market price has fallen below the strike price, the options are worthless. No one will pay $10 per share for a stock that can be purchased for $5 on the open market. Hang on and hope that the stock price goes up.