If you have employee stock options, you’ve likely spent time considering how and when to turn the value of those options into cash proceeds you can actually use. To turn ...
If you have employee stock options, you’ve likely spent time considering how and when to turn the value of those options into cash proceeds you can actually use. To turn stock employee stock options into cash, you have to exercise and sell them. When you exercise, you are buying shares of company stock at the exercise price of the employee stock option. Buying shares of stock means that you still need to pay for them when you exercise — but you’re getting a bargain because the price you pay will likely be lower than the current market price of the stock itself. The exact cost to exercise equals the number of shares you exercise multiplied by the exercise price of the stock option. Understanding the Potential Costs of Exercising Let’s assume you have the following: Grant Shares Exercise Price FMV Exercise Cost Value 1 10,000 5.00 25.00 $50,000 $200,000 In this example, the exercise cost of 10,000 shares is $50,000. However, you don’t have to exercise all your options at one time. If you only exercise 5,000 options (leaving you with 5,000 that can be exercised later), the exercise cost is $25,000, or 5,000 multiplied by $5 per share. The… Read More »
