What Are Non Qualified Stock Options?

If you have been presented with an opportunity to invest in a non-qualified stock, then you might just have an excellent chance to earn money without having to invest your own cash.  What is a non-qualified stock?  Simply put, this is a way for companies to reward employees (and others) without paying them cash.  For instance, you might be given non-qualified stock as a Christmas bonus.

There is considerable benefit to investing in non-qualified stock.  One of these is the fact that you do not have to invest your own money in the stock in order to see financial growth.  You are given the option to purchase non-qualified stock at a lower price than what you would be able to on the open market, reducing your risk if the stock were to become devalued.

They are called non-qualified stock because they do not rate the title of incentive stock options, which are only available to employees.  Incentive stock options are even more beneficial, and offer protection from taxation in some instances.

Non-qualified stock options are great for many reasons.  However, you will have to pay tax on the earnings, above and beyond the price at which you purchased the price.  This is because this income is considered compensation from the company, and, as such, must be taxed.

However, if you encounter stock that has the same value on the open market and through a non-qualified stock option, it is best to purchase them on the open market, rather than by exercising your option.  This leaves you able to use your option when the price rises.

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