Usually, you will have time after you leave the company to exercise your options, though the post-termination exercise period (PTEP) often varies according to the reason (e.g. quitting, firing, disability, retirement). However, some companies do immediately cancel options at termination. When you are unsure of the provisions at your company, you always need to check your stock plan documents, and you should ask your stock plan or HR department. Companies follow termination rules, procedures, and deadlines very strictly. Court cases reinforce the fact that these concerns are completely your obligation:

Alert: It does not matter if you made an honest mistake or missed the deadline by only a few days. When you end your employment with the company, be certain about your official termination date, as this is essential for calculating the exercise deadline.

Survey Data And Example

According to the 2021 Equity Incentives Design Survey by the National Association of Stock Plan Professionals (NASPP), 60% of the responding companies give optionholders three months (90 days) to exercise after involuntary termination of employment. Some of the survey's other PTEP findings are in the table below.

PTEP Termination for cause Involuntary termination Normal resignation Death Disability Normal retirement
None: options immediately forfeited 63% 5% 10% 1% 1% 2%
3 months 26% 60% 65% 6% 10% 21%
12 months 1% 11% 2% 41% 42% 7%
36 months 0% 1% 0% 9% 8% 8%
Full remaining option term 2% 4% 2% 20% 21% 31%

Below are provisions from a stock plan chosen at random. Options are canceled on the earlier of either the expiration date (i.e. the end of the term) or the preset cancellation date, depending on the reason for the termination. If the expiration date falls on a weekend or a holiday, your company's plan may move the expiration date to the last business day before the stated date.

Reason Cancellation date
Normal retirement
plus 10 years of service
Expiration date
Death or disability 12 months from termination
For cause Termination date
All other terminations 90 days from termination
Alert: ISOs may not be exercised later than three months after an individual's termination of employment (except in cases of death or total disability). Otherwise, the option will be treated as an NQSO at exercise.

Watch The Expiration Date Too

Remember also that options can never be exercised after their term has ended, no matter what the post-termination period is.

Example: You become permanently disabled. Your options expire in eight months. Under your plan, disability gives you up to 12 months to exercise your options after termination, as long as your option term does not end sooner. The eight months that remain in your option term override the 12 months your company allows for disability. Therefore, you need to exercise your options within the next eight months.

For both accounting and tax reasons, do not expect your company to generously consider extending the time to exercise an option beyond its original expiration date for retirement. In addition, too long an extension can trigger the nonqualified deferred compensation penalties and provisions in Section 409A of the Internal Revenue Code (see a related FAQ). The final Section 409A regulations allow a modification in your post-termination exercise period that extends the period to the shorter of either (1) the original maximum term or (2) 10 years from the original grant date. Exercise extensions for underwater stock options are not considered an additional deferral feature.