Stock Option Calculator

Incentive Stock Options (ISOs) are only available to employees and offer potential tax benefits - no regular income tax at exercise if you meet holding requirements. Non-Qualified Stock Options (NSOs) can be granted to employees, contractors, and board members, but the spread at exercise is taxed as ordinary income immediately. ISOs require holding shares for 2 years from grant and 1 year from exercise for favorable capital gains treatment.

Intrinsic value is the difference between the current stock price and your strike (exercise) price. If the stock is at $100 and your strike price is $50, the intrinsic value is $50 per share. If the stock price is below your strike price, the options are "underwater" and have zero intrinsic value (but still have time value if not expiring soon).

The timing depends on many factors: stock price trends, expiration dates, tax implications, and your financial situation. For ISOs, early exercise can start the clock on favorable tax treatment but requires paying for shares upfront. For NSOs, you might exercise and sell immediately ("cashless exercise") to avoid holding company stock. Consider consulting a financial advisor for personalized guidance.

Typically, unvested options are forfeited when you leave. Vested options usually have a post-termination exercise period (often 90 days for ISOs, sometimes longer for NSOs). ISOs may convert to NSOs if not exercised within 90 days of leaving. Always check your grant agreement and plan documents for specific terms.

The Alternative Minimum Tax (AMT) is a parallel tax system designed to ensure high earners pay minimum taxes. When you exercise ISOs, the spread (market value minus strike price) is added to your AMT income, which can trigger AMT liability. This doesn't apply to NSOs since they're taxed as ordinary income at exercise anyway. AMT paid on ISOs may be recovered as a credit in future years.

Options are underwater when the current stock price is below your strike price. For example, if your strike is $50 but the stock is trading at $30, exercising would mean paying $50 for something worth $30. Underwater options have no intrinsic value but may still have value if the stock could rise before expiration. Many companies reprice or exchange underwater options during downturns.