I worked for a startup and as an employee, was “granted” 34,000 “Options” and “vested” in 8,000 “Options (ISO)”. The company has not gone public yet but likely will in the next 3-5 years. I just left the company and the exit paperwork says “Upon termination, you have three months to exercise your Options before they expire.” I have no idea what this means. What happens if I exercise them? What happens if I don’t? What does it even mean to exercise them? Please help.
In: 72
In general terms:
Imagine if I give you a piece of paper that says “I promise to gives you some shares on date xxxx/xx/xx, if you want them, at price X”. These are your options.
Now imagine some of those options had a date which has already passed. These are your vested options.
If you go to the person who gave you the piece of paper and say, “I want the shares you promised me”, that’s exercising your vested options.
When they give you the shares, you have to pay the price that was written on the paper. Hopefully, that price is a lot lower than what the shares are trading at on the open market. You can then sell the shares at the market price, let’s call that price Y.
This makes you money in the amount of:
> (Number of shares) x (Price Y – Price X)
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