Non-Qualified Stock Option - NSO

What is a 'Non-Qualified Stock Option - NSO'

A non-qualified stock option (NSO) is 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.

BREAKING DOWN '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.