What is Option Exercise?
Option Exercise
Option Exercise is the action where an option holder purchases shares of common stock at the strike price specified in their grant.
Why It Matters for Startups
Governs the legal rights and ownership distribution of the entity; configuring Option Exercise is critical for managing long-term cap table health and alignment during employee equity monetization and stock option administration.
Detailed Deep Dive
Option Exercise converts vested options into actual common stock. Exercising options requires paying the strike price, which can trigger tax liabilities based on current stock valuations.
Frequently Asked Questions
Q:What is the cost to exercise stock options?
Cost = Number of Options Vested x Strike Price per Share.
Q:What are the tax implications of exercising options?
Exercises can trigger income taxes or Alternative Minimum Tax (AMT) on the difference between the strike price and the current fair market value (spread).
Quick Facts
- CategoryLegal
- Key ApplicationEmployee equity monetization and stock option administration
Coverage Trend12 Weeks
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