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By Investopedia AAA

Employee Stock Options - Introduction

Employee stock options give the employee the right to purchase a quantity of employer shares at a set price during a pre-determined time frame. This section discusses both incentive stock options (ISOs) and non-qualified stock options (NQSOs) as to mechanics (e.g. grant, exercise, disposition and the rules applying thereto), tax ramifications and planning opportunities.

While both ISOs and NQSOs operate conceptually much like standardized options traded on the Chicago Board Options Exchange (CBOE), the difference is that they are acquired through association with an employer and the differences as to liquidity, rules on exercise and disposition and taxation are significant.

Incentive Stock Options

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