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Suppose I was granted 100,000 shares of ISO stock in a startup in the US with a strike price of $1/share and current valuate of $1.25/share. These shares are 100% vested when I leave the company and I now have 90 days to exercise.

If I were to initiate an exercise-and-hold (cash to buy stock) it would cost me $100,000. I don't have $100,000 lying around but fortunately the stock incentive plan allows for exercise-and-sell (cashless exercise for money). This would allow me to exercise and immediately sell the stock for a gain of $25,000 without putting any money down.

However I think the company will continue to do well and would like to keep my stock in the company (but I don't want to pay for it!). So I could initiate an exercise-and-sell-to-cover (cashless exercise for stock). This won't cost my anything but I'll end up with fewer shares.

If I want the most shares but don't enough money to buy all of my options, would there be any reason I couldn't initiate both an exercise-and-hold on half ($50,000) and an exercise-and-sell-to-cover on the remaining stock?

Another way to think about the question: can I perform multiple exercises during my 90 day window? (e.g. exercise 50% of the options, then the other 50%)

Note that this is just an example to illustrate my question: Would it be possible to exercise-and-hold on some shares of stock and exercise-and-sell-to-cover on the rest? I'm ignoring the tax implications for each scenario, etc.

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The simplest thing to do here is to speak to your employer about what is allowed. This should be spelt out in your company's "Stock Options Plan" documentation. In particular, this document will include details of the vesting schedule. For example, the schedule may only allow you to exercise 25% in the first year, 25% in the second year, and the remainder in the third year.

Technically I can see no reason to prevent you from the mix-and-match approach you are suggesting. However, this may not be the case according to the schedule specification.

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  • In the illustration I'm referring to vested options. I'm asking generally whether there is any reason mix-and-match would be prohibited (for example if stock incentive plans usually had limitations in the 90 day exercise window). Of course anything said here may not apply to all situations.
    – Ellis Valentiner
    Commented Aug 15, 2016 at 17:35
  • @user12202013 From what I have been reading online, there does not appear to be any restrictions on the partial exercise of vested options, so the mix-and-match approach should not present any problems. Similarly, the usual exercise window for vested options appears to be 10 years. However, only your employer can provide you with a definitive answer.
    – not-nick
    Commented Aug 15, 2016 at 17:59
  • I think the exercise window upon termination of employment (by employee or employer) usually shortens the exercise window (at least in the US). Most people I know have a 90 day exercise window when they leave the company.
    – Ellis Valentiner
    Commented Aug 15, 2016 at 19:26
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Ask the folks administering your plan. They're the ones who define and implement the available choices for that specific plan.

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