I used to work for a start up that offered stock options which I haven't been able to afford to exercise until now. I'm very new to stocks so I'm not 100% sure how it works.

Currently, I'm able to buy 1673 options at $2.31/share (originally 1746 options were granted) and they expire in 8 months.

I use Carta to manage these options and according to the app, the fair market value for these shares right now is $4.46/share.

So it looks like to buy these shares would cost $3,864.63 plus tax. With tax would cost $5333.01.

Am I correct in assuming that if I hypothetically bought these options and then immediately sold them my profit would be $2128.57 (minus any capital gains taxes)? I'm basing that on a total sale of 1673 shares times $4.46/share minus $5333,01.

  • Is the company public? If not, you likely won't be able to sell the stock right when you exercise your options. Depending on how the company does in the future, those stock shares could be worth much more someday or they could be worth nothing.
    – Daniel
    Apr 25, 2021 at 18:04
  • The company isn't public and I'm not sure if they have any plans to go public in the near future. But they're doing well and I expect them to continue doing well in the future. Apr 25, 2021 at 18:21
  • If the company isn't public then you probably can't sell immediately. I would advise you to hang on to your options until you can immediately sell, unless you're about to lose them (i.e. expiring or you're leaving your job).
    – Craig W
    Apr 25, 2021 at 19:18
  • "according to the app, the fair market value for these shares" HUH?????? That sounds like madness, let's have a sanity check
    – Fattie
    Apr 26, 2021 at 12:51
  • If you exercise the options and immediately sell them, I think they would be taxed as ordinary income. (It's complicated though. They might be part ordinary income and part capital gains.)
    – stannius
    Apr 28, 2021 at 17:46

3 Answers 3



I think the operative phrase in your post is that this involves stocks/options you "haven't been able to afford to exercise until now"

You're already acknowledging that affordability of a $5k stock investment is potentially an issue for you, even now, so I would advise proceeding with caution.

Since the company isn't publicly trading, there's no realistic way for you to sell the shares (you could sell them to someone privately if you could find them and arrange it), so it doesn't matter what their "fair market value" is. I think the valuation you received assumes an analysis of the company's financials and a public market for their stock, which right now doesn't exist.

Now, that being said...you can take the risk of buying the options and exercising them to own the stock if and only if a) you truly believe the company will (at some point in the future) become a publicly-traded company, and b) you're willing to lose everything you invest if you're wrong. If you're willing to be patient and wait for them to go public, you could be well-rewarded. If not, well...you might be able to wallpaper your house with the stock certificates! (not that anyone prints them anymore, but I remember the days...)

If the money you're going to use to buy the stock isn't money you can't afford to walk away from, I would advise you not to do it without some deep soul-searching about what happens if your choice is wrong.


Check with the company to find out if this is an option, because it might be your best one, and even better, doesn't put your money at risk. You won't make the same kind of money you would if you could exercise them and then sell the stock, but this is "found money" to you anyway.

I'm sure I'll get blowback from some people who'll argue it isn't much money you're putting at risk, but the fact is, it's YOUR money, and only YOU know whether it is money you can afford to lose.

You really have to look at cost/benefit - if you have enough faith in the company and its future prospects to risk $5k+, then you simply have to decide whether you're going to take the leap. But if you do, understand the risks in full before you do it! If you know anyone in the company's accounting department and you can have a conversation with them about it, see if they can shed any light on how the company's doing about paying its bills and getting paid by its customers. Find someone you know in the sales department and see if they'll give you an clues about how the company is doing and what the future looks like. In most large organizations this wouldn't be very easy, but with a small company (and it sounds like this one might still be) you might have some luck.

Whatever you do, again let me emphasize - KNOW THE RISKS AND MAKE SURE YOU'RE READY TO FACE THEM before you do ANYTHING!

  • 1
    Also, unless I misunderstand something, for what reason wouldn't OP wait until near the expiry?
    – Fattie
    Apr 26, 2021 at 13:03
  • @ftties, good point, my friend.
    – RiverNet
    Apr 26, 2021 at 13:48

As others wrote, since the company isn't publicly traded, "immediately sell those shares" is easier said than done. But it doesn't mean that selling those shares is impossible. It just means that if you want to sell those shares, you have to find a buyer yourself and negotiate a price with them.

Is there someone in your company who is really enthusiastic about those stock options and regrets that they don't have more of them even though they would have the disposable income to exercise them? Then strike a deal with that person to let them use your stock options.

While employee stock options themselves are usually not transferable (although it can't hurt to ask - in a small company they might make an exception), the stocks bought with them are. So you can exercise your options and then the other employee immediately buys that stock from you for a price you agreed on before (somewhere between the option price and the fictitious market price).

This is a very risk-free way to turn your stock options into money - as long as you have a buyer. Certainly something you should try before you just let them expire. But if you can't find a buyer, then you might want to ask yourself if those shares are really worth even $2.31, and letting them expire might not be such a bad idea after all.

  • The information (from "Carta"?) on the "value" of the shares is nonsensical

  • It would seem that the options expire in 8 months: if you do wish to exercise them, unless there's something we don't know about the contracts, there is no reason at all to exercise them, until, the last few days before they expire. That will give you more time to see how the company is shaping-up

  • Shares/options are utterly useless until a company is public.

(However some companies do have oddball schemes where you can indeed sell shares in some way, before going public (to help boost the fake idea that the shares are worth something before the company goes public). If that's the case you'd have to have full and complete details on that, the limits involved, prices, etc.)

  • 3
    care to elaborate why you think the information is nonsensical?
    – 0xFEE1DEAD
    Apr 26, 2021 at 15:55
  • @0xFEE1DEAD if something isn't traded it has no value? any business purporting to give "prices" to such a thing: is a scam, and incredibly misleading to the point that it's likely illegal in many jurisdictions.
    – Fattie
    Apr 26, 2021 at 17:10
  • 2
    I don't think you can reasonably say that something doesn't have a value just because it's not publicly traded and calling it a scam is a bit of a leap... FYI, here's what Carta has to say about FMV: carta.com/blog/what-is-fair-market-value
    – 0xFEE1DEAD
    Apr 26, 2021 at 21:08
  • 2
    I have had private stock options and they were neither a scam nor was the valuation nonsense. The company hired an outside accounting firm to conduct an independent valuation audit. The company couldn't just make up numbers; there were tax consequences to the number they came up with, so the IRS could object to any pure applesauce. Of course the result wasn't as robust as an active, open market for the shares. Furthermore, I trusted company management to act in good faith. If OP doesn't trust management of their former employer, they probably shouldn't exercise the options anyways.
    – stannius
    Apr 28, 2021 at 17:44

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