[ogreyonder]

Yes; for people participating in an employee stock purchase program, it is called a Disqualifying Disposition. It puts you in the short-term capital gains bracket (with about 15% higher tax).

However, it's still a VERY good idea to do if you plan on holding stock.

I know stories of several people who were exercised options on 7 figures of stock, only to see the price collapse before they were able to sell. The taxes they owed because of that eclipsed their net worth several times over.

[beagle3]

It's an excellent idea if you can do it - but sometimes you can't - e.g. If you are in the 6 month lockup period following an IPO or grant or other SEC rule 144 event. It runs afoul of said law to even hedge with options or on the open market.

It is crazy, but it is that way.