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Lesson 6. Nonqualified Stock Options > Options as Motivators - Pg. 29

Nonqualified Stock Options Grant Price $85 * 29 Spread $15 Profit * $1,500 ($15 × 100 shares) Fair Market Price $100 Before fees and taxes Depending on your financial situation, it might make more sense to forgo the immediate profit and hold the option for a longer period. You may find an even larger return by waiting. I will discuss when to exercise your options in more detail in Lesson 7, "When to Exercise Your Options." Using the last example, it is easy to see that holding the option while the stock appreciates is a good idea, although not always the best idea. This assumes a rising stock price, no guarantee in any market. Number of Shares 100 100 100 * Grant Price $85 $85 $85 Market Price $100 $110 $125 Profit * $1,500 $2,500 $4,000 Before fees and taxes Options as Motivators Some companies use employee stock options as motivation for achieving certain corporate goals. For example, a company wants to increase market share and sets that as a goal. Management knows that if it achieves the goal, the stock's price will likely rise. Plain English