1. Employee stock options are no longer reserved for the executive suite.
From cash-poor Silicon Valley start-ups to old-line manufacturing and service firms, more and more companies are offering stock options to the rank and file as well.

2. ESO's are popular these days.
The National Center for Employee Ownership estimates that employees control 8.3% of total U.S. corporate equity, or $663 billion, up from less than 2% just a decade ago. Employee stock-option plans account for at least $200 billion of that total.

3. More workers are getting stock options.
Ten years ago there were only about 1 million workers covered by a few hundred stock option plans. Today there are probably seven times that many employees participating in some 3,000 plans.

4. You'll see these common terms.
An employee stock option gives you the right to buy ("exercise") a certain number of shares of your employer's stock at a stated price (the "grant," "strike," or "exercise" price) over a certain period of time (the "exercise" period).

5. There are two common types of plans.
Employee stock options come in two basic flavors: nonqualified stock options and qualified, or "incentive," stock options (ISOs). ISOs qualify for special tax treatment. For example, gains may be taxed at capital gains rates instead of higher, ordinary income rates.

6. Nonqualified plans are special.
Unlike ISOs, nonqualified stock options can be granted at a discount to the stock's market value. They also are "transferable" to children and charity, provided your employer permits it.

7. There are three main ways to exercise options.
You can pay cash, swap employer stock you already own, or borrow money from a stockbroker while, simultaneously, selling enough shares to cover your costs.

8. It's usually smart to hold options as long as you can.
Conventional wisdom holds that you should sit on your options until they are about to expire to allow the stock to appreciate and, therefore, maximize your gain.

9. There may be compelling reasons to exercise early.
Among them: You have lost faith in your employer's prospects; you are overdosing on company stock; you want to lock in a low cost basis for nonqualified options; you want to avoid catapulting into a higher tax bracket by waiting.

10. Tax consequences can be tricky.
Unlike with nonqualified options, an ISO spread at exercise is considered a preference item for purposes of calculating the dreaded Alternative Minimum Tax (AMT), increasing taxable income for AMT purposes.