Below are given the differences that Employee stock options have from standardized, exchange-traded options:

• Strike: It has the strike price which is non-standardized and it  is usually the current price of the company stock at the time of issue. Alternatively, it is possible that a formula might be used, such as sampling the lowest closing price over a 30-day window on either side of the grant date. Usually, an employee may posses ESOs that struck at different times and different strike prices.
• Quantity: Typically standardized stock options posses 100 shares per contract. Usually ESOs posses some non-standardized amount.

• Vesting: Usually there will be an increase in the number of shares that are available to be exercised at the strike price as time passes according to some vesting schedule. Vesting only takes place during the duration of the employment.

• Duration: Usually ESOs posses a maturity that far exceeds the maturity of standardized options. Usually ESOs have a maturity of 10 years from date of issue, while 30 months is the maximum maturity that are possessed by standardized options.

• Non-Transferable: Having few exceptions, generally ESOs are non-transferable and they must either be exercised or allowed to expire worthless on expiration day. A substantial risk (perhaps 50%) is there that at expiration the options will be worthless. The holders should be encouraged by this to reduce risk by hedging with listed options.
• Over the Counter: Unlike exchange traded options, ESOs are considered a private contract between the employer and employee. As such, arranging the clearing and settlement of any transactions that result from the contract are the responsibility of those two parties. In addition to this, the employee is subjected to the credit risk of the company. The employee may have limited recourse, if for any reason the company is unable to deliver the stock against the option contract upon exercise. For exchange-trade options, the credit of the exchange has guaranteed the fulfillment of the option contract.
• Tax Issues: Variety of differences are present in the tax treatment of ESOs having to do with their use as compensation. These differences vary by country of issue but generally, ESOs are tax-disadvantaged with respect to standardized options.

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