Investing
Stock Option (Employee Stock Option / ESO)
The right — but not the obligation — to buy a set number of company shares at a fixed price (the strike or exercise price) for a defined period after vesting. If the share price rises above the strike, the option has value; if not, it expires worthless. In Canada, the spread between strike and market price at exercise is taxed as employment income, often with a 50% deduction available on eligible options (the Canadian Controlled Private Corporation rules and the $200,000 annual cap on the deduction add complexity). The decision of when to exercise — and whether to hold or sell the resulting shares — drives both the tax bill and the concentration risk.
Related terms in Investing
How your portfolio is divided across asset classes — equities, fixed income, cash, real assets — chosen to match your goals, time horizon, and risk tolerance.
Spreading investments across different securities, sectors, and geographies to reduce the impact any single holding can have on the portfolio.
A cash (or sometimes stock) payment a company distributes to its shareholders out of profits, typically on a quarterly schedule. Dividends are one of the two ways equity investors earn a return; the other is price appreciation. In Canada, dividends from Canadian corporations receive preferential tax treatment via the dividend tax credit, while dividends from foreign companies (including U.S. ones) are taxed as ordinary income and may have foreign withholding tax applied.
A pooled investment that trades on an exchange like a stock. ETFs typically offer low management expense ratios (MERs) and track an index, sector, or strategy.