Finding the best time and best strategy to exercise incentive stock options is difficult. Competing considerations on income tax, investment planning, and financial planning make it difficult to address the best time to exercise incentive stock options (ISOs) with a blanket answer. Some strategies suggest that exercising early may be a good idea, because this is when the impact from the alternative minimum tax, or AMT, may be lowest. Others suggest it’s best to exercise as late as you can. Waiting offers you certainty as to final value of …
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There are many reasons to exercise your employee stock options: a pending retirement that might require re-allocating assets; an approaching expiration date that warrants a “use it or lose it decision; a strategic exercise plan that integrates tax and financial planning. Coming up with “why” you might want to do a cash or cashless exercise of your stock options is easy. But equally important, and potentially scarier, is knowing “how” to do your exercise. When you exercise your employee stock options, you generally have a choice to do a …
When dealing with employee stock options, the conversation usually centers around issues of income tax and investment risk. We talk about taxes because the amount of tax you pay has an impact on how much money you actually receive when you finally sell your shares. The issue of how much tax you owe depends on the type of stock option you have, when you exercise it, and when you sell it. We also focus on investment risk because owning many stock options means you own a large position in one company. That likely increases your level of risk …
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