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Equity Award Center

Employee Stock Options

A stock option is the right (option) to buy shares of company stock over a specific period of time at a predetermined exercise (purchase) price. You have the potential to make a profit on your stock options if the market price of your company’s stock rises above the exercise price.

Options typically become available to exercise (vest) over a set period of time. Pursuant to an approved stock plan, your company establishes the terms of your stock options, including the number of options granted, the exercise price, the vesting schedule, and the expiration date.

You can exercise your options as soon as they vest or you can wait. In deciding what's right for you, consider:

The terms of your company’s plan documents

The market price of your company’s stock

Your financial situation

Sources of investment help and advice

Taxes

Types of Stock Options

Nonqualified Stock Options (NQSOs)

Stocks acquired through the exercise of NQSOs are taxed as compensation and subject to payroll tax withholding at the time of exercise.

Incentive Stock Options (ISOs):

With ISOs, you are not liable for ordinary income tax if you hold the stock for one year after the exercise date and at least two years after the grant date; however, the exercise of an ISO is subject to alternative minimum tax. When you sell the shares, you’re liable for capital gains taxes. If you do not meet the holding requirements for qualified tax treatment, a portion of your gain will be treated as ordinary income and may be reported through payroll.


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You can find articles, FAQs, tutorials, forms, and a glossary in the Resource Center.

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Schwab Stock Plan Specialists are available by phone, Monday through Friday, 24 hours a day.

Outside the U.S.:
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Speak with a Schwab Stock Plan Specialist:

800-654-2593

Monday through Friday, 24 hours a day

Outside the U.S.:
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