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stock option

Stock option is a right to purchase shares of stock in a corporation at a specified price, usually, but not always, on or before a specified date.

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Stock options are routinely offered to corporate officers and directors (and sometimes to employees) as a means of providing them with added incentive to improve the firm's profitability, which, in theory at least, will boost the market price of the corporation's stock. In recent years, the granting of stock options has been the subject of litigation against a number of corporations and their directors and officers by plaintiffs who have alleged that these organizations engaged in the practice of illegally "backdating" option grants.

Related Terms

Option backdating occurs when a stock option exercise date is set prior to the date on which the...