Stock options are the rights given by a corporation to its employees to buy its shares at a predetermined price. If the market price of a stock rises above the strike price, employees can sell the stock on the market to gain a profit. In Japan, options were first allowed in 1997, and a growing number of companies are introducing them as a new form of compensation for executives and employees. As of June 30, more than 30% of all listed firms, including those listed on the markets for start-ups, had introduced stock options. Calculating the costs of stock options involves such factors as the current market price of a stock, the strike price, the specified period that the employee can exercise the option, and stock price volatility. For companies with volatile stock prices, such as start-ups and high-tech firms, the expenses for the stock options generally increase. Some financial officers of firms have voiced the concern that calculating the expenses of stock options is a complex matter and would become a significant burden. Unlisted companies do not have available the data necessary for the calculations, such as the stock price, so making accurate calculations would be difficult.
Options with a securities price index as the underlying asset. The index options specifies conditions, e.g. the exercise index level, the multiplier, the exercise date(s), the expiry date, etc.