I'm Leaving My Startup. How Do I Pay to Exercise My Stock Options?
The 90-day exercise window means you are on the clock to purchase your vested options before they expire. Here's what that costs, and how people cover it with cash, loans, or non-recourse financing.
When you leave a company, you usually have 90 days to buy your vested stock options or lose them. The out-of-pocket cost can be calculated by multiplying your strike price times your number of vested options. Plus, for incentive stock options (ISOs), a potential tax bill from the alternative minimum tax (AMT) is due even though you haven’t sold anything.
Shareholders cover this with cash, a personal loan, or non-recourse financing from a specialty firm, and each comes with a different cost. This post walks through what exercising costs actually, the ways people pay for it, and what each option gives up in return.
What happens to my options when I leave?
Most companies give departing employees 90 days from their last day of work to exercise vested options, after which unexercised options are forfeited. A smaller but growing group of companies, such as Pinterest, Coinbase, and Kickstarter, have extended this window to as long as 7 or 10 years, so the first thing to check is your own option grant and the company’s current policy, not the industry norm.
One detail that trips people up: even if your company has an extended exercise window, your ISOs still convert to non-qualified stock options (NSOs) 90 days after you leave, because that conversion is an IRS rule, not a company policy. You keep the extended window to buy the shares, but you lose the ISO tax treatment (more on why that matters below) unless you exercise within the standard 90 days.
What does it actually cost to exercise?
Simply put, exercising costs your strike price multiplied by the number of vested options you’re purchasing. You can find those fixed details on your grant. The variable, and often larger, cost is tax. If you hold ISOs, the gap between your strike price and the current fair market value (called the “spread”) can trigger the AMT, a separate tax calculation that adds back certain items most people never think about.
Your strike price comes from a 409A valuation, an independent appraisal of your company’s common stock that sets the price at which you can buy your shares. As your company raises more money and its valuation climbs, the 409A valuation typically rises too, which means the spread between what you pay and what the shares are “worth” on paper grows the longer you wait to exercise.
For 2026, the AMT exemption is $90,100 for single filers and $140,200 for married couples filing jointly, meaning your first chunk of AMT income each year isn’t taxed at all. Above that, AMT is calculated at 26% (28% on larger amounts), and the exemption itself starts shrinking once your AMT income passes $500,000 single or $1,000,000 joint. If you exercise NSOs instead of ISOs, there’s no AMT, but the entire spread is taxed as ordinary income at the time you exercise, which is its own upfront cost.
Worked example
Say you’re leaving a Series D company after four years. You have 20,000 vested ISOs with a $2 strike price, and the current 409A valuation puts common stock at $14 a share.
Exercise cost: 20,000 × $2 = $40,000
AMT spread: 20,000 × ($14 − $2) = $240,000 added to your AMT income for the year
Rough AMT owed: if this is your only AMT preference item and you’re a single filer, $240,000 minus the $90,100 exemption leaves $149,900 taxed at 26%, about $39,000
The total cash needed to exercise and cover the tax bill is roughly $79,000, before you know whether the company will ever go public or get acquired. (This is a simplified estimate. Your actual AMT depends on your full income, filing status, and deductions, so it’s worth running through tax software or a CPA before you commit.) The AMT you pay does become a credit you can use against future regular tax bills, but only if and when your income allows you to use it, which can take years.
What are the ways people pay for this?
Cash or savings. No interest, no fees, no strings, but it’s real money at risk. If the company fails or never has a liquidity event, both the exercise cost and any AMT paid are gone, with only a future tax credit or capital loss as partial consolation.
A personal loan, HELOC, or margin loan. These are recourse debt where you owe the money back on schedule regardless of what happens to the stock. Personal loans for this purpose are also often capped around $100,000, which may not cover a larger exercise.
Non-recourse financing. A specialty finance firm advances you cash to cover the exercise cost, and sometimes the tax bill, in exchange for a cut of your proceeds if and when the shares become liquid. If there’s no exit, you typically owe nothing back (that’s the “non-recourse” part). The tradeoff is cost: once fees, interest, and the firm’s share of the upside are added up, these arrangements commonly run 20–50% of what your shares turn out to be worth, taken off the top before you see anything. For a small exercise, that can cost more than a personal loan would; for a large one you couldn’t otherwise afford, it can be the difference between keeping equity and losing it.
Partial exercise. Nothing requires you to exercise every vested share. Buying a portion you can afford in cash, and letting the rest expire, caps both your cost and your risk.
How do these options actually compare?
Cash:
What it costs you: The cash itself, tied up for years
What happens if the company fails: You lose the cash (partial offset via AMT credit or capital loss)
Personal loan / HELOC:
What it costs you: Interest, and it's due regardless of outcome
What happens if the company fails: You still owe the loan
Non-recourse financing
What it costs you: ~20–50% of eventual share value in fees and upside share
What happens if the company fails: You typically owe nothing back
Partial exercise:
What it costs you: Smaller cash cost, smaller potential upside
What happens if the company fails: You lose only what you put in
No version of this’s free. Cash is cheapest if the company succeeds and most expensive if it doesn’t. Non-recourse financing flips that: more expensive if the company succeeds, but it caps your downside if it doesn’t.
What if I can’t afford to exercise at all?
A few options short of finding tens of thousands of dollars in 90 days: ask the company directly whether it will extend your exercise window (some do, especially for longer-tenured employees, though there’s no obligation to say yes); exercise the portion of your vested shares you can afford in cash and let the rest lapse; or, if your options have real value and a company-approved secondary market exists, look into whether you can sell a portion of shares to cover the cost of exercising the rest.
FAQ
How long do I have to exercise stock options after I leave my job? Most companies give 90 days from your last day of employment. Some extend this to several years. Check your specific option agreement and company policy rather than assuming the industry standard applies.
Do I have to pay AMT when I exercise ISOs? Only if the spread between your strike price and current fair market value, combined with your other income, pushes you above the AMT exemption ($90,100 single / $140,200 married filing jointly for 2026). Below that, there’s typically nothing owed.
What happens to unvested options when I leave? Unvested options are forfeited when you leave, in almost all standard option agreements. Only vested shares are subject to the exercise decision described here.
Is non-recourse financing considered a loan for tax purposes? It’s generally structured to avoid being treated as a loan, which is part of why it doesn’t require monthly payments or personal collateral, but the tax treatment depends on the specific contract structure, and it’s worth having a tax professional review any agreement before signing.
Can I use a 401(k) loan or margin loan to exercise options? Both are possible in some cases, and both are recourse debt where you owe the money back on its own schedule regardless of what happens to your shares, separate from whatever happens with the company.
What to do next
The math in this article is not specific to your grant, your other income, and your company’s current 409A valuation, so the numbers in this post are illustrative, not your numbers. You can model your own exercise cost, estimated AMT, and financing tradeoffs at movewealth.io.
MoveWealth is not a broker-dealer, investment adviser, or lender. This is educational content, not financial, tax, or legal advice. Consult a qualified professional about your specific situation.