Non-Qualified Stock Option - NSO

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DEFINITION of 'Non-Qualified Stock Option - NSO'

A type of employee stock option where you pay ordinary income tax on the difference between the grant price and the price at which you exercise the option.

INVESTOPEDIA EXPLAINS 'Non-Qualified Stock Option - NSO'

NSOs are simpler and more common than incentive stock options (ISOs).

They're called non-qualified stock options because they don't meet all of the requirements of the Internal Revenue Code to be qualified as ISOs.

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