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Also known as: exercising options, option exercise

Exercise

ConceptualLegalOperations

Definition

Exercise: Exercising stock options means buying the underlying shares at the strike price. Early exercise purchases unvested shares, while standard exercise purchases only vested shares. The decision of when to exercise involves tax implications and risk considerations.

Example Usage

“I exercised 10,000 options at $0.50 each, paying $5,000 to own shares now worth $100,000.”

Common Misconceptions

You must exercise to benefit. Depending on exit structure, you may be cashed out without exercising.
Exercise immediately is always best. Tax implications vary and early exercise has risks.
You can always exercise later. Options typically expire 90 days after leaving (or 10 years from grant).

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