There are plenty of ways for California workers to invest in the company that employs them. One of the best of them is an employee stock option (ESO). Investments of this kind can be a lucrative way to enhance your income and shore up your retirement funds. You will need to understand what kind of arrangement this is before you commit to it.
The purpose of an employee stock option
Employer stock options can be offered to workers by the company that employs them. This is the leading type of equity compensation plan that many California workers prefer to receive. ESO grants will normally come in the form of regular call options. They give you the right to buy stock in the company at a specially ordered price for a limited amount of time.
There are several potential drawbacks that you should be aware of. For example, an ESO can have ESOs can have a significant long-term vesting schedule. This can be one of the negative factors that limit the ability to exercise. However, with a bit of time and care, you can overcome this. The key is to exercise patience as your main virtue.
An ESO can mature over time
One of the biggest benefits of ESO arrangements is their value over the long term. This can be true even if the ESO itself is worth very little intrinsically. This type of slowly revealed benefit is one of the main selling points of an ESO.
An ESO can mature over time into an amount that is truly well worth your time and effort. However, you should keep in mind that ESOs are taxed. Holding this type of stock can result in you being taxed if you sell your shares in the open market.