A contract that confers on the holder the right, but not the obligation, to subscribe to the shares of an entity at a fixed or determinable price (exercise price/ strike price) for a certain period of time (exercise period). Share options (which constitute share-based payment/ share grant) are typically issued by an entity to its employees/ management members for engagement/ retainership purposes, subject to a vesting period. A vesting period is the span of time over which there is a service or performance condition, i.e., an obligation to complete a certain period of employment or other types of service or performance level. If the grant has no service condition, then vesting condition does not exist (and hence no vesting period is to be observed).
Shares and share options belong to the class of equity instruments.
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