Iced,

Not a stupid question at all.

In short the answer to your question is the options and the time limits and price limits on those options only encourage the increased speed in which the company tries to increase the value of the company. Basically get the company value per share above the strike price of the options before the options expire.

I will explain...

A stock option gives you the right, but not the obligation, to buy or sell a stock at a specified price by the expiration date of the option. If you choose to buy or sell the stock, it's called exercising the stock option. If you do not exercise the stock option by the expiration date, the option becomes worthless.

It is important to understand that you receive the right to exercise your option to purchase after the vesting period has passed. The vesting period is a mechanism put in place to guard against options being exercised immediately and then sold before having perform the service which was reason for issuing the options incentive in the first place.

here is an illustrative example:

ACME CORP currently trades at 1.00

Employee recieves 1000 options at a strike price of .80 which vest in 1 year and expires in two years

Timeline - Date options received - ACME trading @1.00

- employee cannot exercise options under any circumstances as options have not yet vested

Timeline - 6 months - ACME trading @.70

- employee cannot exercise options under any circumstances as options have not yet vested

Timeline - 1 year - Scenario 1 - ACME trading @.70

- employee has the right to but is not obligated to purchase 1000 shares @.80 regardless of current trading price.

Timeline - 1 year - Scenario 2 - ACME trading @2.00

- employee has the right to but is not obligated to purchase 1000 shares @2.00 regardless of current trading price.

Timeline - 2 years - Scenario 1 - ACME trading @.70

- employee has the right to but is not obligated to purchase 1000 shares @.80 regardless of current trading price. This is the expiry date of the options if the options are not exercised they will cease to exist.

Timeline - 2 years - Scenario 2 - ACME trading @50.00

- employee has the right to but is not obligated to purchase 1000 shares @.80 regardless of current trading price. This is the expiry date of the options if the options are not exercised they will cease to exist.

Hope this helps,

S.