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Options Backdating

Options Backdating Definition

The process of setting the date of an employee stock option to an earlier time than when the option was actually granted. In this way, the exercise price of the option can be set lower than the stock price at the granting date.

Options backdating allows a favorable strike price. This occurred when companies were only required to report stock options within two months of the grant date. Now companies have to report the granting of options to the SEC within two business days, therefore they cannot wait for a period in which the stock price fell to a low and then moved higher within a two-month period.

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