1. An option to buy or sell a specific quantity of stock at a designated price for a specified period regardless of shifts in market value during the period. [Cases: Corporations 116. C.J.S. Corporations §§ 233–240, 242.]
2. An option that allows a corporate employee to buy shares of corporate stock at a fixed price or within a fixed period. • Such an option is usu. granted as a form of compensation and can qualify for special tax treatment under the Internal Revenue Code.
— Also termed (in sense 2) employee stock option; incentive stock option (ISO).
nonqualified stock option. A stock-option plan that does not receive capital-gains tax treatment, thus allowing a person to buy stock for a period (often ten years) at or below the market price. — Abbr. NQSO. [Cases: Internal Revenue 3596.]
qualified stock option. A now-rare stock-option plan that allows a person to buy stock for a period (often five years) at the market price, the stock being subject to capital-gains tax treatment. [Cases: Internal Revenue 3602. C.J.S. Internal Revenue § 315.]
