Ask HN: High cost to exercise startup options – what happens if they go to zero?

Re:Ask HN: High cost to exercise startup options – what happ... by mtmail on Thursday July 11, 2019 @05:11PM (#20415892)

Excersising stock options is usually two transactions in one: you buy the stock, then a second later sell. The company will do this for you. And usually they will also keep income tax and do the proper filing. Since startups stock has no public market the buyer is also the company. If the options price is higher than when you received the options you have profit. It is a gamble but you don't have to bring in any of your own money.

> What if all these shares, which I bought for a substantial chunk of my net worth, go to zero in the long period of uncertainty between exercise and liquidity?

If you own shares, then you have a big loss. If you own (or are entitled to) stock options, then you have no gain or loss, you simply don't exercise them.

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Re:Ask HN: High cost to exercise startup options – what happ... by equity-question on Thursday July 11, 2019 @06:55PM (#20416647)

So let's say 100 of my options just vested. That means that I can choose to buy these options at any point in the future, and normally the company will buy them back from me immediately.

If I choose to do so, then I will have no risk of a loss, because like you said, if the option is underwater, then I will simply not exercise.

The only reason I may end up having to take risk is due to limits on exercise windows. For example, I have to exercise any vested option within 6 months of leaving the company. In that case, I may want to buy the stock, and hold onto it if I expect it to appreciate. Then I will be taking risk, effectively like buying any other stock that may depreciate.

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