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Exercising a stock option or stock appreciation right means purchasing the issuer's common stock at the grant price, regardless of the stock's price at the time you exercise the grant.
On the Summary page for a stock option plan, click Exercise & Sell or Exercise & Hold next to an accepted grant. In a stock appreciation rights plan, click Exercise Grant or SAR Exercise next to an accepted grant.
Exercise and hold is a form of stock option or stock appreciation rights exercise in which you exercise your option to acquire shares of your company stock and hold the stock. When you do this, you need to have funds available (through cash on deposit) to pay the exercise cost and required tax withholding (if applicable).
Exercise and sell is a form of stock option exercise in which you exercise your option to acquire shares of your company stock and sell the stock immediately. The cash proceeds from the sale are used to pay the exercise cost, required tax withholding, and fees.
Fair market value is the value at exercise of the shares you obtain by exercising your options. Fair market value is specified in your employer's stock option plan and is used to determine your taxable gain and withholding taxes for NSOs or the alternative minimum tax for ISOs. For a request to exercise stock options, the fair market value will be one of the following:
Click Act > Estimate Gain to estimate what your proceeds would be if you exercise a certain number of options, or how many options you would need to exercise in request to receive a certain dollar amount or number of shares. You must identify the grant price, the estimated fair market value per share, and the withholding tax rate for NSO grants. The default withholding tax rate represents the estimated total combined taxes on your income (e.g., federal, state, local, capital gains taxes, etc.).
Since the Estimate Gain page is a planning tool, the information you enter and select can be for currently vested stock options or for stock options that may become vested in the future. Your estimated proceeds will not include any applicable fee amounts.
When you click Next on the Review & Submit for Exercise page, you are agreeing that the exercise information is correct, and you are authorizing the trust to execute the exercise on your behalf.
When you exercise a grant online, you always see a Review & Submit for Exercise page. Review this page carefully before submitting the exercise. Once you submit the exercise, you see a Confirmation page displaying the exercise details. You can print this confirmation for your records.
Requests can be entered 24 hours per day and 7 days per week. Requests entered during non-market hours will be processed the next available market day. For exercise and hold requests, you must have the cash available to purchase the stock options in your Stock Plan Account.
Blackout dates are periods with restrictions on exercising stock options or rights. Blackout dates often coincide with the company's fiscal year-end, dividend schedules, and calendar year-end. For more information on your plan's blackout dates (if any), see the company's plan rules.
Your plan may have a vesting period that affects the time you have to exercise your options or rights. A vesting period is time during the term of the grant that you have to wait until you are allowed to exercise it. For example, if the term of your grant is 10 years, and your vesting period is 2 years, you may begin exercising your vested options or rights as of the second anniversary date of the grant. This essentially means you have an 8-year time frame (the exercise period) during which you can exercise your options or rights.
For incentive stock options, a disqualifying disposition occurs when you sell shares prior to the specified waiting period, which has tax implications. For more information, contact your tax advisor.
You can place the following types of exercise and sell requests:
You can place the following time-in-force limitations on exercise and sell requests:
To ensure that all shares for your request are exercised at the same time and avoid a partially-filled request, select All or None from the Condition field drop-down list. If you don't select All or None, your shares may execute in more than one transaction (e.g., 400 of 1,000 shares are exercised as part of a partial request execution; the remaining 600 shares are exercised later and possibly at a different price).
If your company's plan allows you to make a proceeds election when you exercise, you can choose cash, shares, or a combination on the Enter Data for Exercise page. If you choose to receive a combination of cash and shares, enter the percentages in the Cash and Shares text boxes (the total percentage must equal 100%).
Your exercise will not be sent if you leave the Review & Submit for Exercise page before you click Next, or if you click Cancel.
Click View > Pending Exercises. You can attempt to cancel an open or pending exercise by clicking Attempt to Cancel next to the exercise details. Review the request to make sure that this is the request you want to cancel. To place an attempt to cancel request, click Next.
You see a cancel request confirmation, identified by a unique cancellation request number. Confirmation of a cancellation request does not necessarily mean the exercise has been canceled, only that an attempt to cancel the exercise has been placed.
Your stock option exercise will settle in three business days. The proceeds (less option cost, fees, and taxes) will be automatically deposited in your Stock Plan Account.
Proceeds from stock option sales are automatically deposited in your Stock Plan Account. Once the exercise has settled (typically three business days), you can request your proceeds via wire transfer a check from your Stock Plan Account.
Yes, there are tax implications - and they can be significant. Exercising stock options is a sophisticated and sometimes complicated transaction. Before you consider exercising your stock options, be sure to consult a tax advisor.
The Alternative Minimum Tax (AMT) is a tax system which complements the federal income tax system. The goal of the AMT is to ensure that anyone who benefits from certain tax advantages will pay at least a minimum amount of tax. For more information about how the AMT may affect your situation, contact your tax advisor.
The taxes owed on the gain (fair market value at the time you sell, less the grant price), minus applicable fees, from an exercise-and-sell transaction are deducted from the proceeds of the stock sale. Your employer provides tax withholding rates. See Exercising Stock Options for more information. You may want to contact your tax advisor for information specific to your situation.