[doctorbaum]

What's the difference, for the laymen

[iso1210]

Say Spotify's share price is $100, and as part of your compensation you are given an option to buy 100 shares at $100 in 5 years time

If Spotify in 5 years time is $500, you buy 100 shares for $10k, and immediately sell them for $50k, making a $40k profit (or you keep them).

If Spotify in 5 years time is $102, you buy 100 shares for $10k and sell for $10,200, making $200

If Spotify shares in 5 years times is $90, you don't bother buying the shares, but your options are worthless.

Now imagine you were given 100 shares instead, but couldn't sell them for 5 years (an RSU - or restricted stock unit)

In 5 years time, if Spotify is $500/share, your shares are worth $50k

In 5 years time, if Spotify is $102/share, your shares are worth $10,200

In 5 years time, if Spotify is $90/share, your shares are worth $9,000

[maria_weber23]

Yeah this model sucks, unless they give you A LOT more of these options than they would give you RSUs. Then it could work out, if you believe in the company.

[tomerico]

You only earn money if the stock price appreciate

[closetnerd]

I'm envious of your laymen speak.

Exactly right.

RSU means they gave you the stock at price X. Options mean, they gave you the right to buy the stock at price X sometime in the future.

[dominotw]

so its like call options where employer eats the option fee?

[TheCoelacanth]

Yes, except I think they usually just issue new stock when you exercise and dilute the existing owners instead of actually paying someone else for an option.