Options Trading Tutorial

My employer gave us Incentive Stock Options?

Now what? I have the least clue what it is or what to do with it.

Public Comments

1. don't know the details of your employer's plan - basically they are giving you an option to buy stock in the company you work for
2. I am assuming the options are "out of the money" options. This is an incentive to employees to boost earnings and thus, stock value. Let's say that your company's stock value is currently $20 / share. If you own 10 June $25 call contracts, this would give you the right to buy 1000 shares of stock (one contract gives you the right to purchase 100 shares) at $25 / share by the 3rd Friday in June. If on June 19, the stock is at $35 / share, the options will be worth $10,000. If the stock is at $15 / share, the options will be worthless. If your options are "in the money" at expiration, you can either sell the options or exercise the options (convert the options to stock). You do not have to wait until expiration to sell or exercise the options. Options also have "time value" and "volatility value" but that will require a deeper discussion. The most important thing is to remember to exercise or sell the options prior to expiration if the value of the stock is greater than the strike price near expiration. Otherwise you will be throwing away free money.
3. Your employer should provide you with more information on the type of stock options you received and the implications. There are two common types qualified and non-qualified stock option grants. The basic idea is that the stock options are granted at a specific price for a specific period of time, usually 10 years. If the stock goes above the grant price you make money if it doesn't they are worthless. There are tax implications to stock grants. Generally it is best to exercise stock grants near the expiration date. This is just basic stuff, you need to get more information to make a informed decision.