How Consider Incentive Stock Options In Your Overall Personal Strategy

Many companies aiming to go public someday are offering equity to employees in the hopes that it might one day become worth a lot. A common way to do this is through Incentive Stock Options (ISOs). This article discusses an overview of this offering, some of its implications, and the risks to be aware of.

ISO Definition

Incentive Stock Options (ISOs) are the option, but not the obligation, to buy employer stock at a price lower than what is offered to outside investors, also known as the fair market value (FMV). Think: employee discount on stock. Hypothetically, you may get offered to purchase stock for $1 per share while the current FMV is $10 per share.