Exercise price.To quote Company Secretarial Services..."An...

Exercise price.

To quote Company Secretarial Services...

"An ‘option’ [over shares] is a right to acquire a share in a company at a future time on certain conditions, most particularly by paying up the ‘exercise price’. Usually, when options are granted, the exercise price is an amount that is greater than the current price/value of the underlying shares. However, that difference is such an amount that it is a reasonable expectation that during the life of the option (ie, before its ‘expiry date’) the market price/value of the shares will become higher than the exercise price – so that on exercise the shares received are worth more than the exercise price paid up to the company [as new capital]. "