Backdating stock options definition
This is important to note, because the grant date is what determines the exercise price on the options.
For instance, if the board meeting is on January 3, 2012, and Company XYZ stock closes at per share that day, then the exercise price of John's 2012 stock are backdated, then his exercise price is only per share.
This makes the options in-the-money for the grantee (Jane Smith, in our example), basically giving her options that are instantly profitable.This article is within the scope of Wiki Project Business, a collaborative effort to improve the coverage of business articles on Wikipedia.If you would like to participate, please visit the project page, where you can join the discussion and see a list of open tasks.The practice sometimes also occurs in the insurance industry, whereby policy issuers make the effective date of a policy (or claim) earlier than the application date in order to obtain a lower premium for the customer (or obtain better claim results). When he was hired, the Company XYZ board of directors offered John an attractive salary as well as an annual grant of 1,000 Company XYZ stock options.Those options give John the right but not the on the date of the grant.