Rethinking Whether to Exercise and Hold Non-Qualified Stock Options for Long-Term Capital Gains

When it comes to evaluating strategies to exercise your Non-Qualified Stock Options (NQSOs), what is your best plan of attack? Do you: Exercise and sell all your NQSOs immediately, cashing out the full proceeds? Exercise your NQSOs and hold shares of stock, hoping the stock price will go up? Or, leave your NQSOs unexercised and hope the stock price will go up? If you anticipate a higher stock price in the future...

Non-qualified stock options and incentive stock options are the two types of employee stock options that you may receive as part of your compensation package. While they have some similarities, they also differ, particularly when speaking to how they may be taxed at exercise and upon the final sale of stock.

Some employers may allow you to choose how you receive your equity compensation. They may allow you to receive it all in NQSOs or all in RSUs or they may allow you to...

Employee stock options are a powerful tool for businesses to provide an incentive for key employees and those who contribute to a company’s success. Stock options give you the right to purchase shares of stock at a predetermined price within a certain period of time through a vehicle called a stock option grant.     If the stock price increases above the exercise price of the employee stock options, the price you can buy your shares,...

If you have non-qualified stock options, you’ve likely spent time researching when and how you’ll face taxes for them. As a general rule, you will be subject to ordinary income tax on the profit you make when you exercise non-qualified options. Being taxed when you exercise non-qualified stock options, or NQSOs, is attractive for a few reasons. For one, you control when your options become taxable. You may also enjoy more clarity as to what...

There is no easy way around it, employee stock options are complicated. And depending on the type of stock options you have, how many you have, other types of employee stock options you own — along with all your other specific financial planning needs — understanding what to do with your employee stock options can become even more difficult to figure out. That’s the bad news. The good news is that with a little reading...

Access to employee stock options represents an agreement between you and your employer that allows you to purchase a specified number of shares of the company’s stock at a fixed grant price for a specified period. If the future stock price appreciates above the stated grant price (the price at which you can purchase the stock via your option), the stock options are “in the money.” This is where the agreement can offer a significant...

The decision to exercise your employee stock options can be a difficult one, regardless of whether you have incentive stock options or non-qualified stock options. You have to consider potential tax implications, whether or not you have the necessary cash flow to execute a chosen strategy, and of course, deal with the fear of making a “wrong” decision. Although the tax situations with employee stock options may get complex, the thing that may trip most...

When it’s time to exercise your employee stock options, you generally have one of two options to consider: you can do either a cash exercise or a cashless exercise. The right choice for your situation will depend on a number of factors specific to your finances, your goals, and your needs and challenges to address. But that being said, let’s assume that you’re interested in a cash exercise — and need to know all the...

When the time comes to exercise your non-qualified stock options, you may find yourself asking about the process, the cost, and how it actually happens. This may lead you to ask whether to do a cash exercise or a cashless exercise. Many people default to a cashless exercise for a few reasons. For one, a cashless exercise is an easy option with no out-of-pocket cost. You pay for the costs of exercising your non-qualified stock...