A:

Restricted stock represents any equity that is conditionally given or sold to an insider as compensation or as part of an employee stock option plan. Generally, this type of stock restricts the investor from selling the shares in the short run to make a quick profit. Furthermore, the investor may be required to stay with the company for a certain amount of time before he or she will be allowed to trade the security. In theory, this type of stock only benefits an employee if he or she does a good job of working with the company for the long run. Because the employee can only gain the full benefits of owning this stock by staying with the company for a number of years, it is in the employee's best interest to show good work performance in order to increase the value of the company. If all goes well, after a couple of years the employee will own a valuable stock, which can then be sold for a profit. (For more on this, see Option Compensation - Part One and The "True" Cost Of Stock Options.)

Company treasury stock refers to shares that have been repurchased by their issuer. The main intent of company treasury stock is to lower the number of outstanding shares. When a company repurchases stock, it benefits investors by causing an overall increase in share price. This type of stock can either be canceled or held by the company to later be resold on the market or used to fund stock option plans. (For more info, read A Breakdown Of Stock Buybacks.)

Stock appreciation rights are rights that a company gives to particular employees that allow them to receive bonuses based on the appreciation of the company's stock over a specific time period. These rights benefit employees in the same way that owning a call option would; the more the share price increases over the time period, the greater the bonus the employee will receive.

RELATED FAQS

  1. What risks should I consider taking a short put position?

    Learn what risks to consider before taking a short put position. Shorting puts is a great strategy to earn income in certain ...
  2. What happens if a software glitch fails to execute the strike price I set?

    Find out why trading software can be a double-edged sword, and learn what to do if your trade isn't executed because of a ...
  3. In what market situations might a short put be a profitable trade?

    Discover in what market situations a short put trade might be profitable. Selling puts is a good strategy when a trader is ...
  4. What is the relationship between implied volatility and the volatility skew?

    Learn what the relationship is between implied volatility and the volatility skew, and see how implied volatility impacts ...
RELATED TERMS
  1. Strike Width

    The difference between the strike price of an option and the ...
  2. Inverse Transaction

    A transaction that can cancel out a forward contract that has ...
  3. Reference Equity

    The underlying equity that an investor is seeking price movement ...
  4. Poison Put

    A takeover defense strategy in which the target company issues ...
  5. Boundary Conditions

    The maximum and minimum values used to indicate where the price ...
  6. Assented Stock

    A share of stock owned by a shareholder who has agreed to a takeover.

You May Also Like

Related Articles
  1. Mutual Funds & ETFs

    4 Ways You Can Invest In Gold Without ...

  2. Active Trading Fundamentals

    How To Short Amazon Stock

  3. Forex Education

    Trading Forex Options: Process And Strategy

  4. Entrepreneurship

    Comparing Impact Investing & Venture ...

  5. Investing Basics

    Try Southwest Airlines Options To Avoid ...

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!