They are typically granted by a company over a number of years, typically three to five, called the vesting period. Companies offer them to employees for two reasons. One is that they give employees an incentive to work hard, because the better the company performs, the more the options are worth. The other is that they help the company attract quality workers while conserving its cash. Stock options are more widely available among dot-coms than traditional companies, which offer less reward in the future because there is less risk of the company going out of business in the present.
Stock options can be valuable, but it's important to understand how they work.
Leaving a company before the end of the vesting period, for example, means giving up some portion of the options. Even when options are in hand, employees can' t sell their stock unless the company has started selling stock to the public at large through an initial public offering. In other words, there's no guarantee that stock options will ever be worth anything, because it may be impossible to sell them on the stock market. Because many employers match at least part of the employee's contribution, the sums can be even higher. What to ask With so many variables, it's important to ask the right questions to determine the best employer.