When should I exercise my stock options?

It depends on cash, tax and how confident you are in the company. Exercising early costs less tax if the value is low, but risks losing the money if the company fails.

What happens to options if the company is acquired?

Vested options are usually bought out or converted into the buyer's equity; unvested ones may be accelerated, assumed or cancelled, depending on the plan.

Are RSUs the same as options?

No. RSUs are shares granted outright when they vest, with no exercise price to pay; they are common at listed companies.

How do I find my company's fair market value per share?

Ask HR or the founders. In India, the fair market value used for ESOP tax is set by a registered merchant banker's valuation, usually updated around each funding round.

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Stock option calculator: what your ESOPs are worth

Employee stock options give you the right to buy shares at a fixed exercise (strike) price. They are worth something only when the shares are worth more than that price, and turning them into money involves paying to exercise and paying tax.

Number of options (vested)Exercise (strike) price per share (₹)Fair market value per share today (₹)Expected price per share at exit (₹)After future dilutionYour tax rate on exercise (%)

Cost to exercise: ₹1,00,000
Paper value today: ₹3,00,000
Value at the exit price: ₹19,00,000
Tax if exercised today: ₹90,000

How it works

Value of options = number of options × (share price − exercise price). The calculator shows this at today's fair market value and at a price you expect at an exit, plus what it would cost to exercise and the tax due on exercising today.

Example: 10,000 vested options at a ₹10 exercise price. Cost to exercise is ₹1 lakh. At today's fair market value of ₹40 a share, they are worth ₹3 lakh on paper; at a ₹200 exit price, ₹19 lakh. Exercising today would create a taxable gain of ₹3 lakh; at a 30% rate, ₹90,000 of tax, before you can sell a single share.

Tax in India

In India, when you exercise, the difference between the fair market value and the exercise price is taxed as salary (a perquisite) at your slab rate, and your employer deducts it. When you later sell, the gain over that fair market value is taxed as capital gains. Employees of eligible DPIIT-recognised startups can defer the tax on exercise. Check our ESOP explainer and a tax adviser for the current rules.

Questions to ask

What share of the fully diluted company do my options represent?
What was the latest round's price, and how is the fair market value set?
How long do I have to exercise if I leave?
How many more funding rounds are likely before an exit, diluting the price per share?

Frequently asked questions

When should I exercise my stock options?: It depends on cash, tax and how confident you are in the company. Exercising early costs less tax if the value is low, but risks losing the money if the company fails.
What happens to options if the company is acquired?: Vested options are usually bought out or converted into the buyer's equity; unvested ones may be accelerated, assumed or cancelled, depending on the plan.
Are RSUs the same as options?: No. RSUs are shares granted outright when they vest, with no exercise price to pay; they are common at listed companies.
How do I find my company's fair market value per share?: Ask HR or the founders. In India, the fair market value used for ESOP tax is set by a registered merchant banker's valuation, usually updated around each funding round.

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Results are estimates for planning and learning, based only on the numbers you enter. They are not financial, tax or investment advice.