What Advantages Does Restricted Stock Have Over Stock Options?

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The advantages of restricted stock over stock options mainly have to do with the upfront cost of purchasing a stock option. Be aware of the restrictions associated with selling off restricted stock with advice 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

What advantages does restricted stock have over stock options? It's a funny comparison, actually. Restricted stock may have an advantage over a stock option because the restricted stock usually comes out of an acquisition or a merger, maybe for an individual who's in the corporation that's involved in that merger or acquisition will be given some restricted stock that they can take advantage of right away. It has restrictions, it's a matter of time. Certain things need to happen within the corporation to allow it to be sold. And on the options side, maybe the disadvantage of an option is if you look at the option and look at the expenses involved in acquiring that option, whereas a restricted stock may have been given as a gift or an award. The option may be something that's actually going to cost more money, although the option is more easily exercised and purchased or sold later. So the advantages really of the restricted stock may be your upfront expenses.

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