ELI5 how exercising my stock options will impact me

From my understanding, stock options just give you the choice to buy stocks at a discounted price. If you exercise your options, you buy the stock. So, you would pay $500 for 50000 shares.

The $1 FMV only comes into play if you decide to sell the stock. It’s much harder to sell if your company is privately held, because you need a buyer. Usually this would happen when the company is acquired or IPOs.

If your company is publicly traded, you could then immediately sell all shares at the current market price. If it’s $1 then you’d be selling them for $50000. Meaning you just got a $50000 - $500 = $49500 bonus. Taxed the same way any other profits would be.

/r/PersonalFinanceCanada Thread