What is a Reload Option?

A reload an option is a form of compensation where an employee is granted additional stock options (ESO) whenever he exercises the previously granted options. The additional stock options granted under a reload option maintains the same expiration date that the old options have, the number of new stocks is also the same as the previously issued ones. One major benefit of a reload option is that an employee receives additional shares when exercising the previously issued shares rather than receive a cash payment. The newly granted stock options can be exercised at the market price. Usually, when the option holder exercises the reload option, a new strike price is set which is the same as the market value the previously issued stocks were exercised.

When Can an Employee Exercise a Reload Option?

Typically, a reload option is an employee compensation that allows an employee to receive additional stock options when the previously issued options are exercised. The method is used by companies rather than paying an employee for the shares being exercised at the maturity date. In a reload option, if an employee with a stock option of 10 years decided to exercise the option in seven years, he will receive additional shares for the remaining years which will have the same market value as the underlying stock in the previously issued option. A reload option is also one of the methods through which firms issue ESOs (additional stock options) to employees.