

This way, you won’t have any ongoing exposure to stock price volatility. Yet another option is to sell all of the shares you receive immediately after you exercise your options at the going market price. The proceeds you receive (or your gain) will be equal to the fair market value of the stock less the grant price, tax withholding and brokerage commissions and fees. After you exercise, you’ll be eligible to receive stock dividends and could benefit from any potential appreciation in the stock’s price.Īnother option is referred to as a “cashless exercise.” Here, you can decide to exercise your options and sell just enough of the stock to cover the costs you incurred to exercise the options. For starters, you could just come up with the cash to exercise the options, including any trading costs, and hold the stock. You have a few alternatives once you are ready to exercise your stock options. All of these details should be in your stock option agreement. Further, if you are laid off before you are vested in your options or your company is acquired, you may lose unvested options.

Most options expire ten years from the date of grant. There are also time limits on when you can exercise stock options. After that, the rest of the options typically vest monthly. If there’s a cliff provision, you’ll need to wait for a specified period of time before the first year’s options vest. Among private early-stage companies, a typical options package “vests” over four years. Vesting criteria restrict your ability to cash in on your options until you meet certain thresholds, which are typically based on your tenure at a company or performance level.

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