[sliverstorm]

I'm more familiar with RSU's, but my layman's understanding is:

RSU is a direct grant of shares, not dissimilar from a cash bonus.

Stock options are the opportunity to purchase shares at a set price, which as I understand it will be lower than market value. If stock price remains stable, you have essentially been granted the difference between the market price and the set price.

[kasey_junk]

The huge caveat to that is that most option contracts require an outlay of cash at exercise time and RSU's typically don't.

If that exercise point is at an IPO or other exit event, it is largely irrelevant because the deal itself will typically finance the conversion of the options to stock. If you quit or get fired on the other hand, you are on the hook for the money to exercise the options. That is on top of your lowered salary and your vesting time period, in order to get any value out of the options you have to give the company you are leaving for one reason or another, real actual cash.