It is advisable for an employee to purchase a stock option if the market price of the stock goes up in value: the grant price is still the same, so the employee is purchasing a stock at a lower price than market value. They can be transferred to a child or a charity, depending on the specific company's policies.
For more details on stock option grants and tips on determining the best time to exercise, read CNN Money's "Employee stock option plans." From the employer's standpoint, the idea behind stock option grants is to give employees the incentive to align their interests with that of the stockholders.
In the past, however, some stock option grants have been set at such low levels that executives ended up enriching themselves, not the shareholders.
However, the grant might not be provided at a lower price than market value, as non-qualified options are.
Since the grant is provided at a specific price, which is usually lower than the market value for the company's stock, employees who choose to take advantage of this opportunity pay income tax on the difference between these two prices upon purchase.
It's important to note that employees are not subject to taxes when the option becomes available to them; rather, they only pay taxes when they purchase a stock option.