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It can be good to have employee stock options

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It can be good to have options.

In this case, we’re talking about employee stock options, which many companies offer workers as part of their compensation package. In a typical plan, management grants its work force the right to buy stock at a specified price (the exercise price) by a certain time (the expiration date).

In many cases, the opportunity to buy the stock extends for up to 10 years. If the company is doing well, the fair market price (the price of the stock on a securities exchange) could be above the exercise price, creating profit for the worker.

“The attractiveness of an employee stock-option plan depends on the performance of the company,” says Kristin Wagner, manager of the Executive Services Team of Wells Fargo Advisors. “There could be a very large differential between the exercise price and the fair market price.” After an employee buys stock from the company, he or she is free to sell all or some of the shares through a financial advisor or brokerage company.

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