Everybody in.
Yeah, it's a pool. Only with options, not water (but maybe champagne if the IPO goes well).
When tiny companies are started, the option pool and all the elements around it are (or at least can be) hugely important. Typically, an early-stage company makes its option pool a really big deal, as the allure of being the next GOOG-AMZN-FB-NFLX is, well, sexy. So a typical option pool might be 20% of the ownership of the company, which is then granted to key employees, who then vest into the ownership of those options over 4 or 5 years. The pool comprises that 20%, and if a company is around a long time, the water in the pool has to be re-filled every few years as granted by the Board of Directors.
See: ESOP. See: Vesting. See: Qualified Stock Option.
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![Finance: What Is a Call Option?](https://media1.shmoop.com/video/thumbnails/COURSE.FINANCE.221_770x433.jpg)
Finance: What Is a Call Option?25 Views
finance a la shmoop. what is a call option? option? option, where are you? okay
yeah yeah. not phone options, call options. and a close but no cigar. a call option [man smokes in a tub of cash]
is the right to call or buy a security. the concept is easy the math is hard.
you think Coca Cola's poised for a breakout as they go into the new low
calorie beverage business. their stock is at 50 bucks a share and you can buy a [man stands on a stage as crowd cheers]
call option for $1. well that call option buys you the right
to then buy coke stock at 55 bucks a share anytime you want in the next
hundred and 20 days. so let's say Coke announces its new sugarless drink flavor
zero it's two weeks later and the stock skyrockets to fifty eight dollars a
share. you've already paid the dollar for the option now you have to exercise it. [man lifts weights]
so you buy the stock and you're all in now for fifty five dollars plus one or
fifty six bucks a share and your total value is now fifty eight bucks. well you
could turn around today and sell the bundle that moment, and you'll have
turned your dollar into two dollars of profit really fast. and obviously had the [equation on screen]
stock not skyrocketed so quickly well you would have lost everything. still you
lucked out and now you're sitting on some serious cash, courtesy of your call [two men in a tub of cash]
options. as for Coke flavor zero turned out to be nothing more than canned water.
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