What is an incentive stock option (ISO)?

ISOs are also called statutory or qualified stock options. Incentive stock options (ISOs) are a popular means of employee compensation for corporate management, granting rights to company stock at a discounted price at a future date. This type of employee stock purchase plan is intended to retain key employees or managers.

What are incentive stock options?

Incentive or statutory stock options are offered by some companies to encourage employees to remain with them long-term and contribute to their growth and development. ISOs are usually issued by publicly traded companies or private companies planning to go public.

Are incentive stock options vested?

Keep in mind most ISOs come with a vesting period, meaning you may be granted the ISOs on a certain date, but you won’t be eligible to exercise the options until you’re vested, which in some cases takes years. What are the disadvantages of incentive stock options? While ISOs offer potential benefits, there are several drawbacks.