Post-Termination Exercise Window
Written by Harry Prabandham
Curated by Rubric Financial
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What the Exercise Window Is
- The post-termination exercise window is the period after an employee leaves during which they can exercise their vested stock options before they expire
- The standard window is 90 days for ISOs and 90 days for NSOs, but many modern startups are extending NSO windows to 5-10 years
- ISOs must be exercised within 90 days of termination to retain their tax-advantaged status; after that, they automatically convert to NSOs
- If an employee cannot afford to exercise within the window, they forfeit all vested options, effectively losing years of earned equity
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About the author
Harry PrabandhamFounder & CEO
Founder and CEO of StartupCFO. MBA from Wharton, MS in Computer Science, and decades of experience building and advising venture-backed startups.
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GlossaryNSO (Non-qualified Stock Options)
Standard employee stock option taxed as ordinary income at exercise on the spread between exercise price and FMV.
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GlossaryAMT (Alternative Minimum Tax)
Parallel tax system that ensures high-income individuals pay a minimum tax. Often triggered by ISO exercises with large unrealized spreads.
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GlossaryISO AMT
The AMT (Alternative Minimum Tax) liability triggered when you exercise ISOs and the spread between strike price and FMV is large.
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