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Lesson 6. Nonqualified Stock Options - Pg. 27

27 Chapter 6. Nonqualified Stock Options In this lesson, you will learn what a nonqualified stock option is and how it differs from other types of options. Nonqualified Stock Options Defined A nonqualified stock option (NSO) is a type of stock option that does not meet the requirements for tax-favored treatment like incentive stock options. NSOs are the most widely used type of employee stock option because there are few restrictions on their use or structure. They are the option of choice for most employee stock option plans that cover all or a significant number of a company's employees. Nonqualified stock options permit you to buy shares of the company's stock at a fixed price for a fixed period. NSOs often come with a vesting schedule such as the one discussed in Lesson 4, "All About Vesting,