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Explain types of stock options and their effect on a company

Explain the types of stock options and their effect on a company.

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There are several types of options. The put and call options that are regularly traded in the financial markets are entirely different in purpose from the employee stock options generated inside the company. I assume the emphasis of this question is on employee stock options because a company can effect financial changes in its own business with the use of options. The exchange-traded options are of more interest to investors. Exchange-traded options clearly can increase volatility of the stock price in the markets and even influence the trading price of a company stock.

Employee stock options (ESO), incentive stock options (ISO) and non-qualified stock options (NQSO or NSO) are all types of employee stock options which vary mostly because of the differences in tax treatment and timing.

Now, to the effects that the use of options can have on a company (some positive, some not):

1. If a company is small and growing, the use of options represents a ...

Solution Summary

The 644 word solution presents six situations where the use of options can have a positive or negative effect on a company.