A Non-Qualified Stock Option (NSO) is a type of employee stock option that does not meet the requirements set by the IRS for favorable tax treatment. When an employee exercises an NSO, they must pay ordinary income tax on the difference between the stock's market price and the option's exercise price at the time of exercise. Unlike Incentive Stock Options (ISOs), NSOs can be granted to a wider range of recipients, including employees, consultants, and board members. This flexibility makes NSOs a popular choice for companies looking to attract and retain talent through equity compensation.