The first determinant is whether the stock’s fair market value exceeds your strike price. If it doesn’t, there’s generally no point in exercising vested options; if you wanted to purchase any shares, you’d be better off buying them on the open market. Beyond that, it helps to have a strategy of deciding when it’s a good time to exercise your NQSOs. Having a strategy will help you decide whether to (i) wait until the options approach their expiration date, (ii) set a price at which you’ve achieved “enough,” (iii) set up an automatic process for exercising your options over time, or (iv) exercise as early as possible to minimize the tax ramifications. You also may decide to mix and match these strategies into a tailored solution that offers you the highest likelihood of successfully meeting your personal financial goals.
