Backdating stock options wikipedia
Options have a role in business outside the stock and commodity markets.In the law of contract, the option is a continuing offer to purchase or lease property.The seller of Whiteacre is obligated to perform if the purchaser pays the ,000 within sixty days.The second form of option contract is created when the seller states to the purchaser, "I offer to sell you Whiteacre for ,000.Stock option plans are used in business to reward employees.A stock option is a contract between the company and the employee giving the employee the right to purchase shares of company stock between certain dates at a price that is often fixed by the company or determinable by formula at the time the option is granted.An option contract is interpreted strictly in favor of its creator and must be unequivocal and in accordance with the terms of the option.
Once an offer has ripened into a contract, however, the rights thereby created are usually assignable.This offer will remain open for sixty days if you pay 0 for this privilege." If the purchaser pays the 0, there is a collateral contract—an agreement made prior to, or simultaneous with, another agreement not to revoke the offer—and the seller is obligated not to revoke.Acceptance of an option contract is operative when received by the offeror, rather than when sent.If the price increases above the grant-date fair market value, the employee will presumably exercise the option and realize an economic gain based on the spread between the fair market value at the grant date and the fair market value at the exercise date.
If the price decreases after the option is granted, the employee will forgo exercising the option and thereby have no loss in economic value.In the case of a commodity option, the right to purchase or sell pertains to an underlying physical commodity, such as a specific quantity of silver, or to a commodity futures contract.