Options terminology

Option Grant - The right to purchase a certain number of shares for a pre-determined price.

Vesting Period - The amount of time you must wait before you are allowed to exercise your option.

Vested - When the vesting period is over, the option becomes vested and you may now exercise your option.

Exercise - An option is exercised when you purchase stock and provided a payment per the agreement of the option.

Exercise Price - The purchase price that is assigned to your option at the time your option grant is issued. This price, by law, must be no less than the "fair market value" (FMV) of the stock the day the grant option was issued.

Early Exercise - Gives you the right to exercise your option before the vesting period is over or before the option has been vested.

Option Agreement - A document that details the terms of your option: the number of shares you can buy, the exercise price, and when you are allowed to begin exercising the option.

Spread - The difference between the current value of the stock and the exercise price

Shares Outstanding - This is stock that is currently held by shareholders, which includes restricted stock. The moment an option is converted into stock it becomes outstanding.

Cliff - The cliff is the period of time before which shares start to vest. It is often a year-long period in which an employer is reviewing the initial performance of an employee.

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