The price per share at which the owner of a traded option is entitled to buy or sell the underlying security.
- For example, if a manager exercises 100 stock options with a difference of $50 between the market price and the exercise price and then sells the shares, he walks away with $5,000 in cash.
- Instead, they use the other option, the intrinsic value approach, which recognizes as compensation expense only the amount in excess of the market price over the exercise price on the grant date.
- Also in December, it issued almost 1.6 million new share options in December with an exercise price of $9.82 per share, replacing options with an exercise price of more than $5.50 each.
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