what is a bargain element
Bargain element. The bargain element in the exercise of an option is the difference between the value of the stock on the exercise date and the amount paid for the stock. Example: You have an option that gives you the right to buy 1,000 shares of stock for $15 per share. If you exercise the entire option at a time when the value of the stock is $40 per share, the bargain element is $25,000 ($40,000 minus $15,000). The value of the stock should be determined as of the date of exercise.