Hello iced,

Seems there is still a little mystery out there about Incentive Stock Options so I'll try once more to muddy the waters.

Firstly they are called...

Incentive Stock Options

....The emphasis being on Incentive.

The pricing is set piece. Simply the closing market price on the day preceeding the day the options were granted and announced.

http://agoracom.com/ir/steliasmines/forums/discussion/topics/490894-stock-options-to-execs/messages/1570967#message

The incentive part comes because an option allows the recipient to buy shares at the price that is set for a period of two years forward in this case. So the carrot is that if the person works hard and smart and increases the company's value, (share price) they can still later on buy cheap shares and after having held them for four months, sell them at the higher market price.

I think the two year window is very positive in that it indicates to me that the company expects matters (likely Tesoro) to be wrapped up by then. Any performance based insentive is a good one in my books.