There are three basic ways as how to exercise stock options or ISOs. The first and most referred way is called cash exercise. Cash exercise is the most straightforward route. You give your employer the necessary money and get stock certificates in return. The second is called stock swaps.
Some employers let you trade company stock you already own to acquire option stock. This strategy has the additional benefit of limiting your concentration in company stock. You must have held the swapped ISO shares for the required one- and two-year holding periods to avoid having the exchange treated as a sale and thus incurring tax.
The two first ways to answer how to exercise stock options are strategy that can be maintained individually without help from outside finance aid. However, there is way for those who cannot provide finance in exercising their stock options. The last method is called the cashless exercises.
This is a case in which you borrow from a stockbroker the money needed to exercise your option and you will sell at least enough shares to cover your costs, including taxes and broker’s commissions simultaneously. Any balance is paid to you in cash or stock. How to exercise stock options also depends on when you need to exercise your stock option strategy. Though many people refer to slow movement is a wise step to take, most people will go early in exercising their stock options strategy, assuming that they will gain more profit than play slow with their investment. People also believe that sacrificing some value will result to a bigger profit in the future.
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