By Harry Prabandham · Updated September 27, 2026
Equity Compensation
Leaving a Startup With Stock Options: The Exercise Deadline
When you leave a company, vested options usually expire unless exercised within a set window, often 90 days, and ISOs lose tax status after three months.
Leaving a Startup With Stock Options: The Exercise Deadline
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The short answer
- The post-termination exercise window is how long you have after leaving to buy your vested options before they expire.
- Many startup plans set it at 90 days, but it is company-specific; some grants allow several years, and some companies extend it at departure.
- Exercising means paying the strike price, and often tax, to own shares that may stay illiquid for years or become worthless.
- Unvested options are generally forfeited when you leave.
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Full Guide
The short answer
- The post-termination exercise window is how long you have after leaving to buy your vested options before they expire.
- Many startup plans set it at 90 days, but it is company-specific; some grants allow several years, and some companies extend it at departure.
- Exercising means paying the strike price, and often tax, to own shares that may stay illiquid for years or become worthless.
- Unvested options are generally forfeited when you leave.
Why is 90 days so common?
- Under Internal Revenue Code Section 422, an ISO must be exercised within three months after employment ends to keep ISO tax treatment.
- The window is one year if you leave because of disability, and special rules apply after death.
- Options exercised later can still be valid if the plan allows it, but they are taxed as nonqualified stock options (NSOs).
- Many companies simply matched the plan window to the three-month ISO rule, though nothing in the tax code requires the option itself to expire.
What does exercising cost?
- The cash cost is the strike price times the number of shares, which can be large for long-tenured early employees.
- For NSOs, the spread between the fair market value and the strike price is ordinary income at exercise, with payroll withholding.
- For ISOs, the spread is not regular income at exercise but may trigger alternative minimum tax, which can be due before you can sell.
- Only the first $100,000 of ISOs, by grant-date value, that become exercisable in a year keep ISO status; the rest are treated as NSOs.
How do people pay for an exercise?
- Some use savings and exercise only part of their vested options, prioritizing the lowest strike prices or the largest tax differences.
- Specialized exercise-financing firms offer non-recourse funding in exchange for a share of any future proceeds, with complex terms.
- Some companies run tender offers or allow secondary sales, but transfer restrictions and rights of first refusal often limit this.
- Any money used to exercise is at risk of total loss if the company fails or is sold below the value of preferred stock.
How can you weigh the decision?
- Gather the facts: latest 409A value, most recent preferred price, funding runway, and the company's liquidity outlook.
- Compare the total cash and tax needed with your net worth, and consider how much single-company risk you already carry.
- Your departure date sets the exercise deadline and the tax year it lands in, which affects how AMT or ordinary income stacks with other income.
- Ask whether the company will extend the window, recognizing that extensions typically turn ISOs into NSOs.
Checks before joining or leaving
- Before accepting an offer, ask what the exercise window is and whether early exercise is permitted.
- Early exercise with an 83(b) election, filed within 30 days, can start the capital gains clock sooner but puts cash at risk earlier.
- Before resigning, confirm vesting dates, the exact expiration date, and the company's exercise process and payment methods.
- Keep copies of grant agreements and the plan, since the documents, not general rules, control your rights.
Key takeaways
- Know your exercise deadline before you give notice; missed deadlines usually mean the options are gone.
- ISO tax status ends three months after leaving, even if the company gives you longer to exercise.
- Exercising is an investment in an illiquid private company, and the full amount can be lost.
- This is general education, not advice; model the tax cost with a CPA before exercising.
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