​Executives can often feel pressure, an emotional connection, or belief that they have an insider perspective on the company stock they hold making it difficult to diversify.

 

Implementing different strategies to manage concentration risk is a prudent approach for any investor.

It's common for executives to describe all the executive compensation they receive as "stock options".

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But stock options, restricted stock options, restricted stock units (RSUs), and employee stock purchase plans (ESPP) work very differently. ​​​

Most companies provide retirees with favorable terms for the vesting of retirement plans, and for their stock options and restricted stock when they quit working. ​ ​

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It's important to know the provisions of your company's stock plan and what your grant agreement states about the acceleration in vesting.

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Companies can grant two types of stock options: nonqualified stock options (NQSOs), which are more common, and incentive stock options (ISOs), and each type has its own tax rules. 

 

​Employee stock purchase plans (ESPP), grants of restricted stock, and restricted stock units (RSUs) carry their own requirements and tax rules, which can significantly differ from those of stock options.