# How is Company's Stock option exercise price calculated ?

My wife's company went public last year and we got few stock options with them at the price of $2 She has 500 stocks vested at this point and lock out period has opened up. Current company stock price is$10

When I try to exercise (buy and hold) the stock I am being charged = ($10 -$2) * 500 = $4000 I thought we would be getting the stock at$2 * 500 = $1000. This does not make sense to me the way its being calculated. Does all this seems correct ? V • Did my answer help you? Feb 8, 2015 at 18:36 ## 1 Answer One thing is the price of the option, and another is the strike of the option. The price of the option is the price to sell or buy the option. The strike of the option is the price that you can exercise the option at expiration, meaning the price you can buy your wife's company stocks using the option. Is$2 the strike of the option? If that is the case then that should be the price that you can buy your wife's company stock... If the stock is at $10 then the price of the option itself is$10-$2 =$8, i.e. you won't be charged $8 but you should be paid$8 per option.

Of course the previous only holds if the strike is $2... which is the info I am missing. •$2 is the strike price of the option and not the price of the option.
– Ved
Feb 13, 2015 at 21:32
• The missing piece of information seems to be if the option is "cash settled" or "stock settled".
– Aron
Oct 23, 2018 at 16:02