SMART INVESTOR: Here's What Your Employer Won't Tell You About Taking Stock Options

Choosing to buy shares in your company is one thing –– what do you do when the higher-ups suddenly serve stock options on a silver platter?

Stock options are often used as a means of incentivizing employees to stick with a company and often sweeten the deal enough to placate them in place of, say, a cash bonus or a raise.

But before you scoop up those proffered shares, take a moment to consider a catch that many workers miss.

Investing Answer's David Steram explains:

Stock options have a finite shelf life and will eventually expire worthless. So you need to know about these expiration dates and be sure to convert options into actual shares before they expire.

Your employer won't track this, so it's up to you. Many employees choose to convert options into shares as soon as they are eligible to avoid the risk of forgetting to act in time. Once you've done so, there is no need to take any further immediate action. If you think your employer has a great future, there's no reason to sell the stock at that time.

The bottom line: While it is flattering and a sign that your employer has confidence in your ability as a worker, stock options are something to carefully consider before accepting.

See the rest of Steram's stock options explainer here.

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