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Finance a la shmoop what is a strike price well before going

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even a second further with this video be sure you've seen our Steven Spielberg [Introduction to a movie at the cinema directed by Steven Spielberg]

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directed what is a stock option video here are the reviews from variety.. well

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to review a stock option is the right to buy a share of stock for a set price

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over a given period of time so let's say you were granted an option to buy a [Graph of amazon stock prices]

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share of Amazon stock in 2015 when the stock was around 400 bucks a share the

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option lasts as long as you work at the company in good standing or after 10

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years have passed which ever ends first well one day you decide you want another job [Woman signing a contract]

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your contract says that if you're no longer an employee with the company then

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you have 90 days in which to either buy out your option that is to buy the

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option and then own the stock or just forfeit the option [Woman underlining words on a contract]

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well since Amazon is now at a thousand bucks a share you obviously don't want

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to forfeit the option to buy that share of stock for 400 bucks but you note that

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your many friends who joined apcray.com at a high price a high strike price which

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creators know they're stock while they're doing a lot of option forfeiting

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that is their options ended up being worthless so you've got a lot to think [Man holding out a bag of dog poo]

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about here this is Amazon not apcray so you want to buy out your option so

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what happens well you were granted your own options at the price Amazon stock [Amazon box falls off shelf]

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was trading at the day you joined the company it was 400 bucks a share so

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that's a strike price that $400 is the price you pay to buy a share of stock at

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some point there in the future that strike price has nothing to do with [Protestors holding signs outside an Amazon building]

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unions not working got it? all right well in order to buy that stock it's

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currently trading in a thousand bucks a share

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you pay Amazon 400 bucks and that buys out your option you then own the stock [Man writing a check to Amazon for 400 dollars]

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that's it Amazon cancel your option then they give

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you a share of actual stock which you now own for as long as you want to own [Man delivering an Amazon box]

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it you can sell it immediately and make a

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$600 a share profit that's a thousand bucks a share it's trading at now minus the

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$400 strike price you just paid to buy out that option got it or you can hold [Grandparent bribing grand-daughter for amazon stock]

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onto those shares and you know use it to bribe your grandchildren one day it's

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worth like a million dollars a share

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