Options Trading Tutorial

When should I exercise my stock options?

I'm working as a vendor to a technology startup but am still unfamiliar with the nuances of stock options. Basically, I have been granted an option to purchase X shares in the company, that vest pro rata over Y years so long as I work with them. The exercise price is "fair market value" as determined by the company's board when I exercise the option. When should I exercise my options? The company is still in its early stages and has not received significant venture funding just yet. Do I just purchase shares as soon as they vest, hoping to capitalize on a high valuation from VCs when it occurs (if not an even higher purchase)?

Public Comments

1. If you are getting it at 'fair market value'' what is the point of the option?You can buy in the open market at the same price........I guess I am missing something..........
2. Once it is public and you are vested you should sell portion of your shares because you can't guarantee that the stock will increase. Take some profit off the table and let the rest ride. You might want to place a "stop loss" so when the stock takes a big down turn you can still exit will a decent profit.