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5 money-making questions you should ask about employee stock options

1. ​What is the vesting schedule?

1. ​What is the vesting schedule?

The vesting schedule is the time frame within which your stock options become exercisable. Make sure that the vesting schedule fits within the time span that you see yourself working at the company. If you leave before the vesting schedule has ended, make sure the company doesn’t retain the right to buy back options at the exercise price, which would essentially erase the value of your vested shares.

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2. ​What percentage of the company’s stock do these options make up?

2. ​What percentage of the company’s stock do these options make up?

A high number of company shares can seem attractive, but don’t let it fool you – it’s all about the percentage of company stock as a whole. Also, be sure to ask what they’re defining as company stock, to make sure they don’t leave anything out of the calculation, such as stock options outstanding to other employees or warrants.

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3. ​How much is your option pool going to expand?

3. ​How much is your option pool going to expand?

Even if your percentage of the company’s stock is satisfactory right now, make sure that your shares aren’t liable to get diluted over time by new financings. If it seems like the options pool is liable to rapidly increase, this may be a reason to think twice about jumping on stock options of your own.

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4. ​. Does this plan allow for cashless exercising?

4. ​. Does this plan allow for cashless exercising?

Cashless exercising is a certainly an added bonus if you’re thinking about stock options. It basically allows for you to use the buildup in value of your option over time to exercise the option. As opposed to using cash to pay the exercise price, which is the more widespread policy.

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5. ​What happens to my stock options if the company is acquired?

5. ​What happens to my stock options if the company is acquired?

In some cases, the company you currently work for may allow you to accelerate your vesting schedule if the company is acquired. They may also offer extended vesting if you are laid off during the acquisition. Be clear about what would happen in this scenario so that you’re not stuck later down the line

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