Glossary Archive - Page 4 of 14

Incentive stock options (ISOs)

by Daniel Zajac, CFP®, EA | September 2, 2022 | I

Among available stock options, ISOs are often the most tax-advantaged, but potentially complicated options to manage, especially since they entail planning for alternative minimum tax (AMT) and AMT credit, and...

In-kind donations

by Daniel Zajac, CFP®, EA | September 2, 2022 | I

When donating the value of shares you own in company stock, you can sell the shares and donate the cash. Or you can transfer the shares “in-kind,” without selling them....

Holding period

by Daniel Zajac, CFP®, EA | September 2, 2022 | H

This term is used for several purposes. First, it describes the time you must hold your stock options before they vest. For this, the holding period typically begins on your...

High-basis/low-basis stock

by Daniel Zajac, CFP®, EA | September 2, 2022 | H

If your company’s stock price increases significantly from the price at which you acquired it, it’s considered a low-basis stock, because your basis is much lower than its current value....

Gross/net value

by Daniel Zajac, CFP®, EA | September 2, 2022 | G

These terms describe the value of an asset before and after accounting for taxes. An asset’s gross value is pre-tax; its net value is after.

Grant date

by Daniel Zajac, CFP®, EA | September 2, 2022 | G

This is the date your company grants you your equity compensation and establishes its terms—including how much time passes before you become vested in your options, as well as when...

Forfeit Value

by Daniel Zajac, CFP®, EA | September 2, 2022 | F

A term to describe the future value of unvested RSUs, stock options, and other equity compensation that would be lost if you terminate employment.

Forfeiture risk

by Daniel Zajac, CFP®, EA | September 2, 2022 | F

Until your equity compensation vests, you risk losing it, depending on the terms of the grant. For example, if you leave the company, you may forfeit the right to exercise...

Fair market value (FMV)

by Daniel Zajac, CFP®, EA | September 2, 2022 | F

The price at which your company’s stock is trading at any given point in time. If the stock is publicly traded, its FMV is whatever price it’s fetching on the...

Expiration date

by Daniel Zajac, CFP®, EA | September 2, 2022 | E

Most stock options have a finite lifespan, after which you lose the right to exercise them. Typically, the expiration date is a set number of years after the grant date—often...

Exercise price/strike price

by Daniel Zajac, CFP®, EA | September 2, 2022 | E

This is the per-share price you’ll pay if you decide to exercise your stock options. Your exercise price is usually set as the fair market value of the stock on...

Exercise (and hold or sell)

by Daniel Zajac, CFP®, EA | September 2, 2022 | E

Once your stock options vest, you have the right, but not the obligation to exercise them. To exercise your options, you purchase stock shares at their exercise price, rather than...