Question:
I will begin working for American Airlines in a few weeks. The pay is not so great so I couldn't afford the 401K plan. I did elect to have the "Stock Options" but I really didn't know what I was signing up for. What will I "receive" if I elected to be in the "Stock Options" plan? Are they going to take money out of my check? If I make 100 bucks a week, how much in stock options would I receive? I am working for reservations and they are just paying $12.00/hour. I tried calling the HR department and they won't talk to me until I actually start working and they create a file for me ... blah, blah blah ... Can anyone help me please?
Answers:
Stock options are awards that give you the legal right to purchase the company's stock at a set price. Usually you aren't allowed to use them immediately, or if you do you have to keep them for a certain period of time. The point of stock options is that if the stock price goes up, you're making money by purchasing stock at less than the market price. For example, your company (ticker symbol AMR) closed at 28.49 on July 9. If you had options issued today at 28.49, you might have one or two years to purchase shares at that price. If the stock is worth $38 next year, your options will let you buy at a great price. Often people refer to such options as being "in the money." If the stock price goes down, your options will be worthless, because you could buy stock on the open market for less. This way part of your compensation is tied to the performance of the company. The better the company does, the more your options will be worth. Theoretically this gives you an incentive to do a good job.
As another answer noted, the specific terms of options vary widely. Once you start your job, get HR to tell you at how the price (called the "strike price") is set; how long you have to hold the stock before you can sell it; how long the options last; whether you are getting less base pay in exchange for the options; and whether the company will loan you money to exercise the options if they are in the money. I would hope they at least offer a payroll deduction in installments so you don't have to pay all of that at once.
You can keep up with the stock price at the URL below. Note that the "options" link is NOT relevant to your options; employee options normally can only be exercised or expire.
There are different plans. ask you Human Resources department and the can answer questions.
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