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Options 101

Joining a startup? Here’s what you need to know about employee stock options

Hey! I just joined Jump.ly, a Google Glass-only social network for parachuting enthusiasts. I’m employee No. 4 and got 10,000 stock options. Can I put in my Tesla pre-order now?

Maybe you should ask your HR department a few questions first. Most new hires receive only cursory information about options, how they work, and what they could be worth; there’s no standard for communicating this information. Knowing the details of your options will be essential when you decide to leave Jump.ly and whether to exercise the options.

First, let’s define a few of the terms.

Option: An option is the right, but not the obligation, to buy stock at a pre-determined price. In plain English, an option is kind of like a bet with...

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