Which is better, a stock option or Restricted Stock Unit (RSU)?


Answer: It is not possible to say that either one is better than the other. A stock option gives someone the right to buy a stock at a certain price (the “strike price”) at some point in the future. An RSU is a grant of a stock; the recipient does not pay money for it. An advantage of stock options compared to RSUs is that the gain between the strike price and the selling price is generally treated as a long-term capital gain, whereas the grant price of an RSU is treated as income, which is generally taxed at a higher rate. On the other hand, an advantage of RSUs is that they always have a nonzero value, whereas a stock option can become worthless if the stock price declines below the strike price.