[dabent]

> When you leave the company, you'll be required to shell out some cash to keep your exposure to the company's upside

I'm not sure what that means. He has to purchase the options in order to exercise them later? I thought once something "vested" it was yours to keep.

[tptacek]

As I understand it, with ISO's, the options generally need to expire within a small number of months after an employee leaves. Regardless of the particulars, in every case I'm familiar with (myself and friends), leaving the company requires you to exercise options or walk.

Vesting gives you the right to exercise. It doesn't do anything else for you.

[dabent]

I think I get it, so when you said "shell out some cash to keep your exposure to the company's upside" you mean buy the options for the value you were granted them (the "strike price" I think). Is that right?

[boucher]

Well, you own the options after they vest; you exercise options in order to purchase shares. In other words, you own the right to buy shares at a specific price (that's the option), and exercising that right means actually buying those shares (generally for a price far below the current share price). You can then hold on to the shares, or turn around and sell them for an immediate profit (depending on the terms of various agreements).

[tptacek]

Careful: you probably own the options only for a very limited time after you leave the company. You cannot generally hold on to your options until the company is (say) certain to be acquired; you generally have to exercise them almost immediately after leaving.

Unrestricted common stock you can keep long-term. Options, not so much.

[DEinspanjer]

Another thing to be careful with, if you leave the company pre-IPO or purchase, you need to exercise those options, but the money you are spending is still very much a pie-in-the-sky bet. Until the shares become publicly traded, you can't do anything with those shares, sell them, trade them, etc. You can only hang on to them in the hopes they become worth something someday.

[tptacek]

Right. If you don't give the company (say) a couple thousand bucks when you leave, you're going to be walking away from your equity grant forever.

[js2]

Nope. Vesting gives you the ability to purchase the shares. Once you leave a company, you typically have 30 days to purchase what you vested, else you surrender them back to the company.

[phuff]

Options are an opportunity to buy stock at a set price (the strike price). So if you're granted 10,000 options at $1 each, and when you sell them the company is valued at $2 a share, you'll make $10,000 off your options. If you go through a company like e-trade you don't have to actually have the $10,000 to sell them. You can do the trade without the $10,000 initial investment to buy the shares specified by your option grant(at least in my case with a previous employer this was true).

Since the option grant is just an offer to buy stock (vs. a stock grant which is an actual share and doesn't cost anything to sell), once you leave the company that offer to buy stock is typically rescinded after a certain period of time.