What are the top 10 questions I should ask about my stock options?
You should know the answers to the questions in the checklist below. Understanding the topics involved and the key stock plan documents will help you make the most of your stock options and prevent costly mistakes.
1. What type of stock options do I have?
2. Is formal acceptance of the grant required? What happens if I don't accept the grant before exercise?
3. What is the vesting schedule?
4. How long is the term of the stock options?
5. What is the deadline for exercising the options to prevent the expiration of the grant?
6. What would happen to the stock options if I were to leave or lose my job, die, become disabled, or retire? What about a leave of absence or furlough? How do these events affect vesting and the expiration date of the option grant?
8. After I exercise my options, in what account will the shares or cash proceeds appear?
In addition, you should understand the tax treatment of the options you have. Nonqualified stock options and incentive stock options are taxed differently. This website's Tax Center covers all tax topics involving stock compensation. For key financial-planning questions to ask about your stock options, see a related FAQ.
For grants of stock options in a private company, see a related checklist of points to know.