The exercise and the sale are separate. Whether you sell the shares at the time you exercise stock options depends on various factors. At exercise, you can usually...
Perhaps. Your stock plan or grant agreement may provide that the company can refuse to allow exercises if...
Your company has full discretion on which methods to include in the plan document or grant agreement. Surveys show that...
You cannot exercise your options unless they are vested. The one exception...
No hard and fast rule exists for determining the fair market value for exercise transactions, as long as a company is...
No; but there is one exception...
No. Until you exercise a stock option, you do not have the rights of a...
Usually not for public companies. One exception might be...
You need to check your stock plan's provisions and the procedures/practices followed by your company or any outside stock plan administration firm. Usually...
There's no requirement for which vested options you must exercise first. The decision of which options to exercise first is part of your...
This depends on how the grant is structured. A federal law...
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Exercise Methods
Check your company's stock plan for the allowed methods and procedures. The most common methods involve...
Review all of your stock plan documents to become familiar with the permitted manners of exercise, and find out...
These depend on various factors. You need to pay the following when you exercise stock options...
Many companies do this because their original plans consider nothing but cash exercises. For example...
The procedures vary (check the details of your stock plan documents). Generally, you are required to complete the following steps...
This is the most common type of exercise. When it is permitted by your stock plan, a cashless exercise is an exercise-and-sell transaction in which you do not...
For the transaction to occur, you need to follow the specific procedures detailed by your stock grant agreement and any brokerage firm or transfer agent your company requires you to use. While it is hard to generalize, the process often works as follows...
The IRS has set deposit rules companies must follow. With a cashless exercise, the broker essentially sells the shares that underlie the options at the time of exercise. The broker sends the company cash from the sale of your shares that is equal to the amount required for tax...
The law seems to leave this matter open. Generally, it prohibits public companies from directly or indirectly making...
A sell-to-cover exercise is a type of cashless exercise in which the broker sells just enough of the shares from your exercise to cover all the costs. You need to be careful about...
A "stock swap" or "stock for stock" exercise is a stock option exercise in which the exercise price is paid with shares of company stock you own...
Yes, you can use ISO stock to exercise NQSOs without disqualifying it, as the...
Not necessarily. Stock option plans that allow stock swaps may permit you to exercise options with already owned shares through a procedure known as...
Yes. If actual shares are delivered, they must be in transferable form when tendered...
Yes, if your company allows it. When you use your ESPP shares as currency for exercising options, you receive both replacement shares equal to the number you exchanged and the profit shares...
Not until the restricted stock vests. Then the stock is...
Your stock plan and your company's accountants may require this before you can tender shares to cover the exercise price. If shares obtained from the exercise of a stock option are used before...
Some companies use "net options" or "net share settlement" to denote exercises in which you return or surrender to the company...
If your plan or grant agreement permits, you may ask the company to lend you the amount necessary to exercise the stock option...
Important terms concern the interest rate and the type of security for the loan. For tax reasons, a loan from an employer must bear interest at the applicable federal rate (AFR), and it must allow the company to sue you if you do not repay the loan...
Transfer agents are record keepers hired by public companies to assist in the...
Not if you used cash, a company loan, or shares of company stock that you already own. If you engage in a "sell-to-cover" exercise...
You can place four types of sell orders, depending on your brokerage firm and company rules...
Brokers are allowed by Regulation T of the Federal Reserve to lend up to 50% of a stock's market price on the day of the loan...
A margin loan allows you to borrow money from a stockbroker by using negotiable securities as collateral. Optionholders can use the borrowing power in stock they will receive to pay for an option exercise when the market price is...
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Restrictions
The popular media sometimes confuse the term "blackout" with "lockdown." For stock plans, these terms apply to different...
Most companies do not prohibit exercises of stock options during blackout periods (but see an exception). However, you need to be careful about...
As the IRS confirmed in Revenue Ruling 2005-48, the tax-measurement date...
It depends on whether you hold the shares at exercise or sell them. If you merely exercise stock options when you know material nonpublic information about your company, the exercise itself is not a violation, according to most experts. However...
The period for option exercise depends on both your employer's plan design and the reason for your termination. If the options are not exercised by the specified date, they are forfeited. Court cases and survey data show that...
Retirement is a termination of employment under your stock option plan. Under almost all stock option plans, after you terminate employment the plan specifies...
Often, stock option plan documents provide a longer exercise period for death than for other terminations of employment. For example...
Generally, stock options are exercisable only when they vest. However, some pre-IPO companies grant options that...
Tax errors can be costly! Don't draw unwanted attention from the IRS. Our Tax Center explains and illustrates the tax rules for sales of company stock, W-2s, withholding, estimated taxes, AMT, and more.
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