Incentive Stock Option Definition
Incentive Stock Option - ISO
is a type of employee motivation as this option can be granted only to
employees. The exercise price of the option is usually lower than its market
value. This incentive is supported by a tax benefit: if the employee holds the
shares for 1 year from the date of exercise and 2 years from the date of grant,
his profit is taxed as long-term capital gain, at lower rates than ordinary
income.