Stock options provide employees with the opportunity to purchase company stock at a predetermined price, known as the strike price, after a specified vesting period. This article by Maddie Wolf aims to demystify stock options, explaining their mechanics, potential benefits, and risks. Vesting schedules, typically spanning four years with a one-year cliff, determine when employees can exercise their options. Exercising stock options can lead to significant profits if the company's stock value increases, but it also carries risks if the company's performance declines. Factors such as tax implications and the timing of liquidity events, like acquisitions or IPOs, play crucial roles in deciding when to exercise or sell options. Additionally, the article emphasizes the importance of consulting a financial advisor for personalized advice due to the complexities involved. The text includes hypothetical examples to illustrate various scenarios employees might encounter, as well as a glossary to explain key terms related to stock options.