Bargain element
The bargain element phrase is generally used in describing the difference between one price or cost and it's fair market value. For example in the case of stock options, an employee stock option is granted at a specific price, known as the exercise price. It is the price per share that an employee must pay to exercise his or her options and typically is the market value of the stock on the date of the grant. The exercise price is important because it is used to determine the gain (called the bargain element) and the tax payable on the contract. The bargain element is calculated by subtracting the exercise price from the market price of the company stock on the date the option is exercised.
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