Equity Understanding Options

⬢ TIER 1Soft

Medium

Salary impact

1 months

Time to learn

Easy

Difficulty

Careers

At a glance

Stock options are the right to buy company shares at a fixed price (strike price). RSUs are shares you're given (with vesting). Both are common compensation in tech. Understanding the difference, vesting schedules, tax treatment, and valuation helps you compare offers and build wealth. Most employees don't understand equity and leave value on the table. Time to learn: 1-2 weeks. The impact: understanding equity can clarify career decisions and wealth trajectory.

What is Equity Understanding Options

Equity compensation includes two main types: stock options (the right to buy shares at a fixed price) and RSUs (restricted stock units, direct shares that vest over time). Both are common in tech, startups, and growth companies. Options require an exercise decision: you pay the strike price, you own the shares. RSUs are simpler: they're given to you; you own them once they vest. Understanding both helps you evaluate offers and make financial decisions.

🔧 TOOLS & ECOSYSTEM

Equity calculatorsStock option spreadsheetsValuation resourcesTax softwareCompany cap table analysisOffer comparison templatesFinancial planning toolsEquity tracking platformsEducational resourcesLawyer consultation

💰 Salary by region

Region	Junior	Mid	Senior
USA	$40k	$75k	$130k
UK	$24k	$45k	$78k
EU	$28k	$55k	$95k
CANADA	$45k	$85k	$145k

🎓 Certifications

Stripe's Equity Guide Carta Equity Education Khan Academy Finance Basics

🎯 Careers using Equity Understanding Options

⚖ Compare with

Equity Negotiation Vesting Salary Negotiation

❓ FAQ

What's the difference between stock options and RSUs?

Options = right to buy shares at a set price (strike). You exercise (pay strike price) to get shares. RSUs = direct shares, given to you with vesting (no purchase needed). Options = used to be standard (cheaper for companies), RSUs = increasingly standard (simpler for employees). Both vest over time (usually 4 years).

What's a strike price and why does it matter?

Strike price = the price you pay to exercise an option. Company offers $0.01 strike when they're worth $1B. If you exercise at $0.01, you own shares worth $1 (minus strike $0.01 = $0.99 profit per share). High strike price = low profit per share = less valuable. Always ask for the lowest possible strike.

If the company fails, what happens to my options?

They're worthless. You have the right to buy shares in a company worth nothing. Your options are lost, but you haven't lost any cash (unless you exercised and paid the strike price, in which case you lost that cash). Equity = high risk, don't gamble your rent on it.

What's the difference between ISOs and NSOs?

ISOs (Incentive Stock Options) have favorable tax treatment if held >1 year from exercise. NSOs (Non-Qualified Stock Options) are taxed as income immediately. ISOs are better tax-wise, but only available if you have <$100k strike price. Most options are NSOs.

How do I know if my equity grant is good?

Benchmark against peers (Levels.fyi, Blind). Ask: '0.5% of what?' (current shares or fully diluted?). What's the strike price? Company valuation? Growth trajectory? Use equity calculators (Carta, Signalfire) to model scenarios.