Wallst, I can only share my personal experience with Stock Options granted to members of an organization. You are right in that they are meant to incentivize an individual either from a performance or retention perspective based on future performance.
You are wrong from my experience on the price. From personal experience the options are always "discounted" from the current PPS. In my case specifically they were granted at an 8% discount to the closing price on the day of the offer. They are 10 year option grants, with a vesting period of 4 years (25%) vested each year.
Most of these Options will be exercised as "cashless". Meaning you get paid the gap after taxes. This is not dilutive, now if external folks that were granted these Buy the shares, then of course it could be dilutive.
My personal experience with these are that rarely if ever are they purchased, they are exercised "cashless" as it is free cash from the gap if the stock runs. If it goes below, well, then they are worthless.