Incentive stock option

So, you know how sometimes parents give you a prize or treat for being extra good? That's kind of like what an incentive stock option is.

When a grown-up works for a company, sometimes the company will want to give them a special kind of bonus called an incentive stock option. This bonus is like a special prize that lets the grown-up buy some company stock at a certain price.

The grown-up gets this special bonus because the company wants them to work really hard and do a good job, because if they do, the company will grow and become more valuable. And when the company becomes more valuable, the grown-up who has the stock options can buy shares of the company at a cheaper price than what they're worth on the market.

It's like if you saved up all your allowance money to buy a toy, but then you found out there was a sale and you could buy the toy for less than what you saved up. The grown-up with the incentive stock option is saving up their bonus to buy company shares for less than what they might cost in the future.

Sometimes there are rules around how and when the grown-up can use the stock options, but it can be a really nice bonus to have if the company does well.