I feel like this is a dumb question. What's the difference between equity and stock options? Or are they the same thing?

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Equity is a percentage of the companies value. The company giving you stock is a form of equity, but it could also be a set percentage (but probably not).

Stock options are the option to buy company stock at some point in the future at a set price. So the company could give you the option to buy 1,000 shares in two years at $10 a share. If the current share price is $20, and the value increases to $25 than you've effectively been given $15,000. It's a way of compensating employees based on how well the company does.

likehelpful

This is a great descripton. Thank you!

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I'll be honest...I have always wondered as well but was too scared to ask. I'm so glad someone asked.

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Looool, no worries haha

Kind of clueless with this stuff but I feel like some companies use them interchangeably even though they mean different things which makes me even more confused?

likehelpful

You can own shares of stock in a company through stock options. Having equity in a company means some amount of ownership I'm pretty sure.

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So they are different then?

Following.

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Equity = Stock or part ownership of the company. Some equity requires you be an employee at the time of any payout (e.g. if the company is acquired).

Option = An option to buy a certain amount of stock at a set price, typically below market value or before the company goes public. If the stock rises in value this can very lucrative.

Employee Stock Purchase Programs = A benefit that allows employees to buy company stock using pre-tax money, sometimes at a discount.

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I've always thought of it as stocks = public ownership and I'm part of the public equity = private company ownership and I have a slice of the pie. Too simplistic maybe?

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