Listen to a Business English Dialogue About Incentive stock options
Avery: Hi Ruby, have you heard about incentive stock options in business and finance?
Ruby: No, I’m not sure. What are they?
Avery: Incentive stock options are a type of employee stock option that allows employees to buy company stock at a specific price, typically below the market price.
Ruby: Oh, so it’s like a reward for employees to buy company stock?
Avery: Exactly. They’re often used as a way to incentivize employees to work towards the company’s success and align their interests with shareholders.
Ruby: Are there any restrictions or conditions on incentive stock options?
Avery: Yes, there are usually vesting periods and exercise conditions that employees must meet before they can exercise their options and buy the stock.
Ruby: How do employees benefit from incentive stock options?
Avery: Employees can benefit if the stock price increases above the exercise price, allowing them to buy the stock at a discount and potentially sell it at a profit.
Ruby: Can employees lose money with incentive stock options?
Avery: Yes, if the stock price decreases below the exercise price, employees may choose not to exercise their options, resulting in a loss of potential profit.
Ruby: Are there any tax implications for incentive stock options?
Avery: Yes, there are specific tax rules for incentive stock options, including potential tax advantages if certain conditions are met.
Ruby: How do incentive stock options differ from non-qualified stock options?
Avery: Incentive stock options have tax advantages and are subject to specific regulations, while non-qualified stock options don’t have the same tax benefits and are more flexible in their use.
Ruby: Thanks for explaining, Avery. Incentive stock options sound like an interesting employee benefit.
Avery: No problem, Ruby. They’re a valuable tool for companies to attract and retain talent while aligning employee interests with company performance.