Rangoth
Blackwing Lair Raider
- 1,580
- 1,734
Typing from phone so I will be brief, but knowing when to execute is key also.
I do work for a lot of startups and options are a heavy piece of my pay as well. As said above risk is the startup fails to shit and my options are worth 0$.
Think of this like owning stock in a company that claims bankruptcy or ceases to exist
however you typically can execute once they are “vested”. Basically means buy the shares the options represent. I recommend the options thread for details on all of this stuff. There are many potential reasons to do or not do this.
I’m simplifying it but some scenarios and facts:
you pay taxes on the existing gain or loss at the time of the execution. If the options strike price is 5.00 and the current valuation is 5.00 and you choose to execute(buy shit). You have to pay the strike price AND the taxes, but in this case the taxes would be 0.00 because the stock is worth exactly what you paid for it. If the company is worth 10.00 a share you will only pay 5.00 per share to execute the options, but then taxes on the 5.00 gain you just made. This has always felt strange to me because it’s almost like a tax on unrealized gains, but not quite.
without getting into details, the reason you would do this is so you own the shares long enough that it’s consider long term and not short term capital gains, also because there is sometimes fine print that such an agreement could expire or if you left the company you forfeit any unexecuted options. Read the fine print.
with my situation I tend to execute as soon as possible if I believe in the startup to avoid high taxes and hang during the growth. But I’ve helped startups which have died and I’m glad I didn’t execute or that money would be gone forever /sad panda.
anyway there are fantastic resources online and of course you can consult a lawyer or financial consultant as well. But generally speaking with a non shit companyor it could rival 401k levels of yield. All depends.
with spacex/Elon, good chance it’s worth it as he seems to shit success.
I do work for a lot of startups and options are a heavy piece of my pay as well. As said above risk is the startup fails to shit and my options are worth 0$.
Think of this like owning stock in a company that claims bankruptcy or ceases to exist
however you typically can execute once they are “vested”. Basically means buy the shares the options represent. I recommend the options thread for details on all of this stuff. There are many potential reasons to do or not do this.
I’m simplifying it but some scenarios and facts:
you pay taxes on the existing gain or loss at the time of the execution. If the options strike price is 5.00 and the current valuation is 5.00 and you choose to execute(buy shit). You have to pay the strike price AND the taxes, but in this case the taxes would be 0.00 because the stock is worth exactly what you paid for it. If the company is worth 10.00 a share you will only pay 5.00 per share to execute the options, but then taxes on the 5.00 gain you just made. This has always felt strange to me because it’s almost like a tax on unrealized gains, but not quite.
without getting into details, the reason you would do this is so you own the shares long enough that it’s consider long term and not short term capital gains, also because there is sometimes fine print that such an agreement could expire or if you left the company you forfeit any unexecuted options. Read the fine print.
with my situation I tend to execute as soon as possible if I believe in the startup to avoid high taxes and hang during the growth. But I’ve helped startups which have died and I’m glad I didn’t execute or that money would be gone forever /sad panda.
anyway there are fantastic resources online and of course you can consult a lawyer or financial consultant as well. But generally speaking with a non shit companyor it could rival 401k levels of yield. All depends.
with spacex/Elon, good chance it’s worth it as he seems to shit success.
- 1
