Exercising Stock Options

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Exercising stock options is when a potential investor decides to take advantage of the original option contract to either purchase or sell the stock option. Learn how exercising stock options will take place at the agreed upon price with information from an investment manager in this free video on stock options.

Part of the Video Series: Stocks & Mutual Fund Investments
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Video Transcript

O.k., exercising stock options. If you've been given stock options or someone owns stock options and they decide to exercise them, what they're doing is exercising their right to either buy or sell the stock at a predetermined price. And that's the price on the contract of the option itself. So if you're working with options, you will have an equity listed. The equity has been given a specific sale or purchase price ahead of time, and at the date that the stock option is available to be exercised, you have that choice. So exercising the stock option is just taking advantage of the contract that was originally agree upon and you know, going forward with either the purchase or sale depending upon what type of option you have. And sometimes when we talk about stock options people are talking about options for purchasing stock in the future given by a company as a bonus or as a you know, potential award for the future. So two type of things when we talk about stock options, a bit of a misnomer when we talk about corporate awarded stock options but sometimes in addition to salary, and other compensation, the option to purchase stock at a certain price is always, is put out there as well.

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