A stock option is the right to buy a share at a price fixed in advance. That fixed price is the strike price, also called the exercise price.
A stock option is the right to buy a share at a price fixed in advance. That fixed price is the strike price, also called the exercise price.
It is a different instrument from an RSU and the difference is one word. An RSU gives you shares. An option gives you the right to buy shares.
So an option only pays if the share price rises above the strike. Buy at $50 when the market says $80 and you're $30 ahead per share. If the market says $40 the option is worth nothing today, and people call that underwater. The right still exists. Exercising it would simply mean paying more than the share is worth.
Options vest like RSUs. Vested options are described as exercisable. Unexercised options also expire, usually ten years after grant, which RSUs never do.
Oracle's option activity for the year that ended May 31 2026.
| Movement | Options (millions) | Weighted-average exercise price |
|---|---|---|
| Outstanding at the start of the year | 41 | $52.58 |
| Granted or assumed | 15 | $279.53 |
| Exercised | (25) | $50.04 |
| Cancelled | (10) | $60.51 |
| Outstanding at the end of the year | 21 | $217.63 |
| Exercisable at the end of the year | 5 | $49.37 |
Check the balance. 41 plus 15 minus 25 minus 10 is 21.
Now the line that looks alarming and isn't. The average exercise price went from $52.58 to $217.63 in one year. Oracle did not reprice anything. Twenty-five million old options with an average strike of $50.04 were exercised and left the pool, and fifteen million new ones came in at $279.53. The average moved because the mix moved.
That is what a weighted average does. It describes the population, and the population changed.
The last row is the useful one for an employee. Five million options are exercisable, at an average strike of $49.37. Those are the older grants that have finished vesting. The newer, much higher-struck options are still working through their schedules.
The trap is comparing an option grant with an RSU grant unit for unit.
A thousand RSUs and a thousand options are not the same offer. The RSUs are worth the share price whenever they vest. The options are worth the share price minus the strike, and only if that difference is positive. An option is a bet on the price rising. An RSU is not.
That's why companies granting options usually grant more of them.
The second trap is forgetting that exercising costs money. To turn a vested option into a share you pay the strike price. A thousand options at a $50 strike needs $50,000 of cash before you own anything. People with valuable vested options sometimes cannot afford to exercise them.
The third is expiry. Options have a last day and leaving a company usually shortens it sharply, often to ninety days. That window is in your grant agreement.
You're offered a choice. 1,000 RSUs or 4,000 options with a $60 strike. The share price today is $60.
What are the RSUs worth if the price stays at $60?
1,000 times $60. $60,000, before withholding.
What are the options worth if the price stays at $60?
Nothing. The strike equals the price, so exercising gains you nothing.
What if the price reaches $90?
RSUs: 1,000 times $90 is $90,000. Options: 4,000 times $30 of gain is $120,000. Getting there takes $240,000 of cash up front to exercise, which you would usually fund by selling some of the shares.
Say in one sentence how the two differ.
RSUs pay something at almost any price. Options pay nothing until the price beats the strike and then pay more per unit than RSUs do.
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