Question 1

What is the difference between ISO and NSO stock options?

Accepted Answer

Incentive Stock Options (ISOs) offer tax advantages and are only available to employees with a $100K/year limit. Non-Qualified Stock Options (NSOs) have no tax preference but can be granted to anyone including contractors and advisors with no limit on the amount.

Question 2

What is a typical vesting schedule for stock options?

Accepted Answer

The standard vesting schedule is 4 years with a 1-year cliff. This means 25% of shares vest after the first year, then the remaining 75% vest monthly or quarterly over the next 3 years.

Question 3

What is an exercise price in a stock option grant?

Accepted Answer

The exercise price (also called strike price) is the price per share that the optionee must pay to purchase the underlying shares when exercising their options. It's typically set at fair market value (FMV) on the grant date.

Question 4

What happens to stock options when an employee leaves the company?

Accepted Answer

Upon termination, unvested options are typically forfeited. Vested options can usually be exercised within 90 days of voluntary resignation, 12 months for death or disability, and are immediately forfeited if terminated for cause.

Question 5

What is double-trigger acceleration in stock options?

Accepted Answer

Double-trigger acceleration means 100% of unvested options vest immediately if two conditions are met: (1) a change of control occurs, AND (2) the employee is terminated without cause within 12 months following the change of control.

Question 6

How long do stock options typically last before expiration?

Accepted Answer

Stock options typically have a 10-year expiration period from the grant date, though some companies use 7 or 5-year terms. After expiration, unexercised options become worthless and can no longer be exercised.

Stock Option Grant Generator