I read on https://fairmark.com/compensation-stock-options/employee-stock-purchase-plans/overview-of-employee-stock-purchase-plans-espps/ (mirror) in the context of employee stock purchase plans (ESPP) in the United States:

A qualified ESPP can offer stock options that are similar to incentive stock options, but few companies set them up that way. Instead, they offer an opportunity to buy stock at a favorable price through payroll deduction. In a sense you’re exercising an option if you choose to participate, but it isn’t quite the same as holding a stock option. The specifics of these plans vary from one company to the next.

Why don't companies systematically offer ESPPs that offer stock options (instead of stocks)? ESPP offering stock options seem financially beneficial to the employees.

  • This is just my personal observation, but companies that have ESPPs are typically well-established companies, where people might reasonably buy the stock as an investment. Stock options are granted by startups in order to give employees a greater stake in the company's success. So I would expect that very few employees would want to buy stock options, and those that did would likely be at risk of being charged with insider trading.
    – jamesqf
    Feb 1, 2020 at 17:26
  • 1
    @jamesqf, presumably an options ESPP would have the same kind of regularly scheduled purchases as a shares ESPP, so the purchase transaction at least would not be restricted by insider trading rules. And the exercise transaction wouldn't have any more risk of being insider trading than the sale transaction in a share ESPP scheme.
    – The Photon
    Feb 1, 2020 at 19:13
  • @The Photon: While it's true that regularly spaced transactions probably wouldn't fall afoul of insider trading rules, that doesn't address the question of why very many people would want to buy them. Certainly the only reason I would is because I knew the stock was somehow poised to make a large price jump.
    – jamesqf
    Feb 2, 2020 at 3:14

1 Answer 1


This is mostly speculation, but since nobody else has answered, I'll go ahead:

It's more difficult to explain to many employees (who aren't all the kind of people who visit PF&M SE) what options even are, how to value them, and how to exercise them. So participation would probably be lower for an option-based ESPP.

  • 1
    Agreed. From ten colleagues I asked, eight didn't even understand how buying the offered reduced-price stock works and why it makes sense to buy them.
    – Aganju
    Feb 1, 2020 at 19:07

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