Stock options are financial contracts that give the holder the right, but not the obligation, to buy or sell a specific number of shares of a company's stock at a predetermined price (called the strike or exercise price) within a certain time frame

. There are two main types of stock options:

• Call options: Give the right to buy shares at the strike price.
• Put options: Give the right to sell shares at the strike price

In the context of employment, stock options are often granted by companies to employees as part of their compensation package. These employee stock options (ESOs) allow employees to buy company shares at a fixed price, typically after a vesting period. The goal is to enable employees to benefit from the company's growth if the stock price rises above the strike price

. Key points about employee stock options include:

• They are not actual shares but the right to purchase shares later at a fixed price

• Employees usually must wait through a vesting period before they can exercise their options

• If the market price exceeds the strike price, employees can buy shares at a discount and potentially sell them for a profit

• If the market price is below the strike price, employees are not obligated to exercise the options and can let them expire

• There are two main types of employee stock options: Incentive Stock Options (ISOs), which may offer favorable tax treatment, and Non-Qualified Stock Options (NSOs), which have different tax implications

In summary, stock options provide a way for investors or employees to gain exposure to the price movement of a company's stock with the flexibility to decide whether to buy or sell shares at a predetermined price within a set timeframe