A non-qualified stock option – or NSO – is a stock option given to employees as a way for them to profit from good company performance.  NSOs are a form of compensation that incentivizes employees with owning a small part of the company.  When an employee exercises the stock, they are required to pay ordinary income tax taken from the profit.  The scope of NSOs also extends to advisers and consultants. Advisory shares fall under non-qualified stock options for tax purposes.