It’s All Fun ’n Games

Until you have to pay AMT

Here’s a thought exercise. Let’s pretend you work at a Private Company X and do not early-exercise your stock options. After a year, you have vested some of your options grant. During your tenure at Private Company X, the stock valuation increases, netting you an on-paper profit. Subsequently, you leave Private Company X without having exercised your options. The options grant is set to expire in 90 days. Exercising the options is a major outlay and will trigger AMT to boot. You are no longer working at Private Company X and have no insight into how the business is doing in a COVID-19 world. What do you do?

I decided to exercise some of my options (about a third of them). The way I figure, I still get a taste if the company does well. Sure, I may be leaving a ton on the table, but if COVID-19 destroys the business, at least I’m not out tens of thousands of dollars.