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Stock Options vs RSU | Are they Both Same? | Know the Top Differences! - YouTube
Channel: WallStreetMojo
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hello everyone hi welcome to the Channel
of WallStreetmojo
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friends today we have a topic which is
your stock options versus RSU that is
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a district stock units let's try to
understand this in a complete detailed
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format now see stock option versus
restricted stock units are closed
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elite but you know they have many
differences between them t when we talk
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about the stock option it means you know
the employee employee stock option and
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you know not the call and put options so
you need to take care on that it's what
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we are talking about is the employee
stock option and not the or derivative
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instrument the stock option is you know
it is given to to high-performing
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employees as a part of their
remuneration so stock option versus
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restricted stock units that is the So
versus RSU they can use this shares
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and can make a profit
later as for the terms and the condition
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of the stock options like you know if
for example if a company hired a CEO and
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offers him that's a 20,000 stock options
the company determines that you know the
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term of the stock option in such a case
or in such a is such that if the CEO
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would be able to exercise the right of
the stock option after the for 3
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years from joining the date so now the
CEO receives the stock option at a rate
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of or let's say $4 for per share so his
purpose would be to increase the stock
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price as as you know higher as he can in
the next 3 years you know and after
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the 3 years he can still sell his
stock later let's say at $15 and can
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make profit of eleven over here that is
a huge profit so often you know stock
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options are offered to employees who
perform
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searingly well and you know also the
stock options are given a discount
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these stocks options are given a discount
what exactly over here are this con
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means it means you know that it is less
than
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price of stock at that very particular
point so that you know these stock
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options can be considered as as a reward
at the hand you know the RSU that is a
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restricted stock units that the
organization is offered to keep the
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exceptional repeat exceptional employees
in the organization but the way the RS
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use are constructed is different RSU use
are paid as for the you know what we
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call as the vesting you can see as for
the vesting schedules
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and they don't offer all the shares
together let's understand this
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difference in our detail for my stock
options versus the RSU well on the offer
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date stock options can be issued any day
after the issuance can be issued after
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the issuance and over here the RSU
can also issued anytime after the
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issuance so in both the scenario stock
can be issued after the issuance date
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now the shareholders right there is a
full right of the shareholders offered
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that is a person who is been imparted
such as he enjoys full right of the
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shareholders that has been offered over
here the RSU of the restricted rights of
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the shareholders have been offered there
will be soft losses there'll be some
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hardest stringency that will be involved
in as a part of the clause that's RSU
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the voting right just like as the full
right of the shareholders are offered so
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the stock options they're considered as
full ship without any sort of
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restrictions so the voting rights are
absent in case of RSU or the voting
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rights are not given as it as restricted
stock units the dividend feed the stock
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options in case of the stock options
just like they are ordinary shareholders
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they are absolutely being being paid
dividend and over here no dividend has
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been paid or will be as you can see you
know there is no voting right there's no
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dividend that has been paid you see
there is a restrictions that have been
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involved in case of RS the settlement
after the vesting see after the vesting
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period is over the stock options become
ah this is very important common stock
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and it depends on the call employee how
he or she wants to accessorized an
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option now in the case of RSU the terms
are followed and the shares offered are
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set so the settlement can be deferred
for receiving the tax benefit but a
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certain to the certain extent well let's
see the next one the payment during the
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settlement in case of the stock options
so the time of the settlement the stocks
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have been in fingers of RSU the cash or
it may be stopped that can mean what is
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a tax-free see in case of the stock
option taxes are paid at the time of the
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sale of the long term capital in android
that is at the time of the disposal
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otherwise for non calling
non-qualifying disposal for disposition
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taxes are paid at the time of the sale
at the income tax in case of RSU taxes
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have been paid on the vesting
not the disposal if at the time of
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the settlement company grants stocks and
employee keeps a stock for more than
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12 months then the capital gain
treatment can be well that is it for the
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differences we have discussed in total
7 differences bye for now
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and you should be having a clear idea
exactly what is going around I will take
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an example a short one so that you have
a more you know an attachment towards
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her this particular topic see let's say
there's a call mr. kg he is a great
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employee of his organization and he
wants to keep him to entice him to say
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that the company decides that you know
they would pay kg closer to 2,000 what we
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call as RSU but as per the vesting
schedule of 400 shares each year 400
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shares each year for the next 5 years
okay so if mr. kg if he stays in the
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organization for the next 2 years he
would only get how much 800 shares so
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there is another part of RSU which we
need to understand that you know when RSU
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are offered it also thing called
capital gain taxes income taxes so
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companies that pay capital gain that
Capital gain taxes income taxes they employees
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the employees were offered the RSU's
need to pay those taxes if you take the
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example of over here mr. kg let's say
you know each RSU can be sold at $10 per
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share he has been offered how much
2000
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*10 and 20000 no and at the
capital in taxes and the income tax
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turns out to be 5000 then J or
mr. K G he would only receive
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20000-5000 after selling
off and the final amount will be
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15000 so after discussing the example
let me recapture it everything let me
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conclude as you can understand by far
now that stock options and the
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restricted stock units are offered that
you know the companies can hold on to
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extraordinary returns extraordinary
Employees but you know stock options or RSU
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of these of these options are quite
different and the scope of each of them
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are diverse - so that's why
understanding them separately is very
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important because it gives it options to
think before applying so that's it for
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this particular topic thank you everyone
for joining the session
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