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Stock option

Also called: share option, option

In one line

A right — not an obligation — to buy a set number of company shares at a fixed price (the strike price) for a limited time.

In plain English

An option isn't a share. It's a coupon that lets you buy a share later at today's locked-in price. If the company grows, that locked-in price becomes a bargain; to actually own shares you have to 'exercise' (pay the strike price).

If you were explaining it to a 5-year-old

It's a voucher that says you can buy a toy for 1 coin anytime this year. If the toy's price jumps to 10 coins, your voucher is worth a lot — but you still have to hand over the 1 coin to get the toy.

Why it matters when you sell

You usually can't sell options directly in a secondary — you have to exercise them into shares first, which costs money and can trigger tax. That's the first hurdle to liquidity.

Related terms

Strike priceExercise (options)Incentive stock option (ISO)Non-qualified stock option (NSO)Restricted stock unit (RSU)Post-termination exercise window

Put it to use

Cost to exercise + AMT · Are my options worth anything?

Hold private-company shares? Our free estimator shows what your stake could be worth and whether you can sell — no sign-up. Value my equity (free) → · Back to the glossary →
When you're ready to go deeper, there's an optional Equity Toolkit and Report.

Sources

A general market-practice term. See how we define and source the glossary in our methodology. General information, not advice.

Educational information only — not financial, tax or legal advice, and not an offer to buy or sell any security. Definitions are general; your own documents and local law govern your situation. PrivateTechShares is independent and not a broker or marketplace.