NQO

What does NQO stand for?

Non-qualified option

NQO is a popular slang that stands for non-qualified stock option. This label is assigned to a special type of stock option that gives you the ability to buy shares of a company at a predetermined price before a specified date.

Unique from an ISO, with an NQO, you’re required to pay normal income tax on the difference between the exercise price and the market value of the stock when you decide to exercise it. This means, you pay tax on the profit you make when the market value of the stock is higher than what you paid for it.

Unlike some other types of stock options, NQOs can be given to anyone, not just employees of a company. So, if you’re offered an NQO, it doesn’t necessarily mean you work for the company.

Keep in mind that NQO is also known by other acronyms like NSO and NQSO. So, if you hear these terms, they refer to the same thing as NQO.

Example for using ‘NQO’ in a conversation

Hey, did you hear about the NQO?

No, what’s that?

It stands for non-qualified option, like a stock option.

Oh, got it. So, what’s the difference between NQO and ISO?

With NQOs, you have to pay ordinary income tax on the difference between the exercise price and the market value of the stock when you exercise it. ISOs have different tax rules.

Interesting. Can NQOs be granted to anyone?

Yes, that’s right! NQOs can be granted to anyone, not just employees. They’re also known as NSOs and NQSOs.