What is the difference between stock options and RSUs?

Stock options give you the right to buy company shares at a fixed price (strike price). You must exercise them to own the shares. RSUs are restricted stock units that are shares given directly to you, typically vesting over time. RSUs do not require you to pay a strike price; they become yours when they vest.

What does it mean when stock options are underwater?

Stock options are underwater when the company valuation falls below the strike price. For example, if your strike price is $20 but the company is now valued at $10 per share, your options have no immediate value. This is common in startups that have struggled or down rounds.

How do I exercise my stock options?

To exercise your stock options, you contact your company or the plan administrator and pay the strike price to buy the shares. For example, if you have 1,000 options at a $10 strike price, you would pay $10,000 to purchase 1,000 shares. Some companies allow cashless exercises or allow you to use shares to pay for the exercise.

Is stock options formal or informal?

Stock options is formal and professional language used in official compensation discussions, offer letters, and financial contexts. It is appropriate for both verbal and written communication in workplace settings.

What is a typical vesting schedule for stock options?

A typical vesting schedule in tech is four years with a one-year cliff. This means no options vest in the first year. After one year, 25 percent vest, and then the remaining 75 percent vest monthly over the remaining three years. However, schedules vary by company.

Stock options meaning in tech — Speak Tech English

Commonness	5/5
Versatility	4/5
Formality	CasualFormalFormal
Spoken ↔ Written	SpokenWrittenBoth
Directness ↔ Diplomatic	DirectDiplomaticDirect
Region	US and UK

Say it like this

✓I received 10,000 stock options as part of my offer

✓My options are underwater because the strike price is higher than current valuation

✓I am vesting my options over four years with a one-year cliff

Real examples

in a salary negotiation

"The base salary is $120,000 plus 5,000 stock options with a $15 strike price and a four-year vesting schedule."

in a team meeting

"Since the company just raised Series B funding, the valuation increased, which means my stock options are now worth more."

in a one-on-one with a manager

"I want to understand the tax implications of exercising my stock options before they expire."

Don't say this

Handle with care. Non-native speakers sometimes confuse stock options with equity or RSUs. Stock options are the right to buy company shares at a set price, while RSUs are shares given directly. Also avoid using as a verb.

✕I have 1,000 stocks in the company.

✓I have 1,000 stock options in the company.— Stock options are the right to buy shares, not the shares themselves. Saying just 'stocks' is imprecise.

✕The company stock optioned me 5,000 shares.

✓The company granted me 5,000 stock options.— Stock options is a noun phrase, not a verb. Use 'granted' or 'awarded' instead.

✕My stock options are the same as RSUs.

✓My stock options are different from my RSUs because options require me to exercise them at a strike price, while RSUs are shares given directly.— Stock options and RSUs are distinct compensation types with different tax and vesting implications.

Other forms

noun (plural)

stock options

"My stock options vest monthly over four years."

noun (singular/uncountable)

stock option

"Each stock option grants me the right to purchase one share."

noun (in phrases)

stock option plan

"The company offers a competitive stock option plan for all employees."

Often used with

grant stock optionsused when a company awards options to an employee

exercise stock optionsused when an employee buys shares at the strike price

vest stock optionsused to describe the process of options becoming available to exercise over time

strike pricethe fixed price at which stock options can be purchased

underwater stock optionsoptions where the strike price is higher than current company valuation

stock option clifftypically one year, after which a portion of options becomes available

Similar words

equitybroader term that includes options, RSUs, and direct share ownership

stock grantssimilar compensation but usually refers to RSUs or direct shares rather than options

employee stock purchase plan (ESPP)allows employees to buy company stock at a discount, but different structure than stock options

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Practice

Try it

4 quick exercises

Pick the most natural phrasing

1. When discussing compensation packages, which phrasing is most natural?

I received 8,000 stock options with a $12 strike price.I received 8,000 options to stock at $12.I was given stock to option for 8,000 at $12.I got 8,000 in stock to option.

Complete the sentence

2. My _______ vest over four years with a one-year cliff, meaning I can exercise them starting after my first year.

Spot the mistake

3. Which sentence uses stock options incorrectly?

The company granted me 10,000 stock options as part of my compensation.I plan to exercise my stock options when the company goes public.The company will stock option me additional shares next year.My stock options have a strike price of $15 per share.

Rewrite naturally

4. Rewrite this using stock options terminology: 'I can buy company shares at a set price in the future as part of my pay.'

Questions

Quick poll

Have you said "stock options" in a standup this week?

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