Bear in mind that in some geographies the employee might be required to pay taxes on the capital gain of the stock option. To understand how a typical employee stock option plan works, let’s look at an example.

Therefore, he/she will receive the net value of 10$.

Employee Stock Option - ESO: An employee stock option (ESO) is a stock option granted to specified employees of a company.

An employee stock ownership plan (ESOP) is an employee benefit plan that gives workers ownership interest in the company. Employee stock option plan (ESOP) is an “option” granted to the company employee carries the right, but not the obligation, to buy a promised number of shares at a …

In this case, the employee has to pay 10$ because of the option and receive 20$ because of the exit. Assume on 1/1/2019 you are issued employee stock options that provide you the right to buy 1,000 shares of Widget at a price of $10.00 a share. If an employee working for company XYZ gets an option on 100 XYZ shares at $10 and XYZ's stock price goes up to $20, the employee can exercise the option and buy the 100 XYZ shares at the $10 strike price, sell them on the market for $20 each, and pocket the $1,000 difference ($2,000 - $1,000 = $1,000).