“Should I exercise my stock options?”

Determining if and when to exercise your stock options is hard. Vested can help.

We get asked this question every day: "Should I exercise my options?" It's a tough question to answer. On one hand, you want to start owning your company early to potentially decrease the tax burden. On the other hand, if your company goes belly-up, you'll have nothing to show for it (and you'll be out of a job).

The difficult question is really "when should I exercise my options?". That's where we come in.

Vested helps you navigate the world of startup stock options. From offer analysis through exit, we'll be by your side.

You don't have to use your own money.

Instead of exercising with your own money, you may be able to get a risk-free loan to exercise your stock. This will cover your exercise cost and your taxes. You only pay back when your company goes public or is acquired -- and only if you make money.

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When should I exercise my stock options?

It's a generally understood best practice to try and exercise your options early and often.

The thought process goes: if you are able to exercise your options before a 409a valuation (Fair Market Value, or FMV) change upwards, you could save significantly on your tax bill.

The problem with this "best practice" is that very few people actually do it. Most of us wait until something happens before we think about exercising our options.

If you strongly believe your company's stock is going to go upwards, and you can handle the costs associated with exercising, it may be beneficial to exercise. For most people, however, the costs and risks are too high. In that case, it's likely better to get a risk-free loan for your options, sell your options, or simply wait and see.


Consider the Alternative Minimum Tax (AMT) when exercising your stock options. In short, you'll potentially owe a huge bill to the IRS after exercising your stock, even before you sell it.

If exercising your options puts you over a certain threshold, you'll owe the difference between the strike price and the Fair Market Value for your stock, even if you don't have the ability to sell.

Exercising your stock options is risky. With Vested, you'll be armed with all the tools you need to feel confident you're making the right decision:

  • a trustworthy, independent assessment of your company's performance,
  • personalized insights for your stock options,
  • real-time monitoring for potential buyers, and
  • negotiation support for your next role.

All this for free. Sign up now or type your company name below to get started.

Vested helps you figure out if it's the right time to buy.

We'll assess your company, give up-to-date insights and recommendations, and help you buy or sell your shares. Simply type where you work to get started.

Vested, Inc. ("Vested"), a Securities and Exchange Commission (SEC) registered investment adviser (RIA), offers a software-based financial advice engine that delivers automated financial planning tools to help users achieve better outcomes. Registration as an RIA does not imply a certain level of skill or training and does not constitute an endorsement of the firm by the Commission. A copy of Vested’s current written disclosure brochure filed with the SEC which discusses among other things, Vested’s business practices, services and fees, is available here.

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