What happens to your stock options when you leave

When you leave a startup, you keep the options that have vested and you lose the ones that have not. The vested ones do not stay yours forever: most plans give you a post-termination exercise window, often 90 days, to either pay to exercise them or walk away. Miss that window and the vested options expire worthless, no matter how good the company turns out to be.

That single deadline is where most engineers lose money they did not know they had. This post walks the exact sequence: what vests, what the window is, what exercising costs, what tax can hit you, and the questions to ask before you give notice. For the mechanics of how options vest in the first place, read how stock options and vesting work and treat this as the leaving-day companion.

Vested vs unvested: what you actually keep

On your last day, the company draws a line through your vesting schedule. Everything that has vested up to that date is yours to exercise. Everything that has not vested is forfeited the moment you leave. There is no partial credit for the month you were halfway through.

A standard grant is 4 years with a 1-year cliff, vesting monthly after that. Say you were granted 48,000 options and you leave at the 30-month mark. You are 30/48 of the way through, so 30,000 options have vested and 18,000 are gone the day you walk out.

What is the 90-day exercise window?

The post-termination exercise window is the clock that starts the day you leave. During it, you can exercise your vested options by paying the strike price (the price set when you were granted, also called the exercise price). After it closes, the vested options expire and you get nothing for them.

For incentive stock options (ISOs), the tax code only allows ISO treatment if you exercise within 90 days of leaving. That is why 90 days is the default in so many plans. Some companies extend it (more on that below), but you should assume 90 days unless your specific plan documents say otherwise in writing.

The 90-day window is the most expensive deadline most engineers never see coming. It starts the day you leave, not the day you remember to check.

One more trap: a company event can shorten the window. If the startup gets acquired or goes through a major change while you are inside your window, the clock and terms can change fast. Read the fine print before you assume you have the full 90 days.

What does it cost to exercise?

Exercising is not free. You pay the strike price for every option you exercise, in cash, to actually own the shares. The cost is `strike price x number of options`, and it can be a large number on a grant that has been vesting for years.

Worked example. You have 30,000 vested options at a $1.20 strike. To exercise all of them you write a check for `30,000 x 1.20 = 36,000`. That $36,000 buys you 30,000 shares of a private company you cannot sell yet. The money is locked up until a liquidity event, which might be years away or might never come.

This is the core tension. The options can be worth a lot on paper, but exercising means putting real cash into an illiquid asset on a deadline. Plenty of engineers decide it is not worth it and let the options lapse. That can be a perfectly rational choice, especially at an early company where the outcome is far from certain. For how that bet actually pays off or does not, see how startup equity makes money or not.

What about the tax on top of the cost?

The strike price is what you pay to own the shares. Tax is a separate bill that can land on top, and it depends on your option type.

• ISOs (incentive stock options). No ordinary income tax at exercise, but the spread between the strike price and the current 409A fair market value counts toward the alternative minimum tax (AMT). A large spread can produce a real AMT bill in the year you exercise, even though you sold nothing.
• NSOs (non-qualified stock options). The spread is taxed as ordinary income at exercise, withheld like salary. If the 409A value has climbed well above your strike, that bill can be steep.
• The spread is the variable that bites. Exercise early when the 409A value is close to your strike and the taxable spread is small. Wait years and the spread (and the tax) can balloon.

Worked AMT-style example. Your strike is $1.20 and the current 409A value is $5.00. The spread is `5.00 - 1.20 = 3.80` per option. On 30,000 ISOs that is `30,000 x 3.80 = 114,000` of AMT preference income in one year, on top of the $36,000 you paid to exercise. The AMT is not 114,000, but that number feeds the AMT calculation and can create a five-figure tax bill (illustrative, not advice).

Can the exercise window be longer than 90 days?

Yes, and it is worth knowing whether yours is. Some companies have moved to extended exercise windows of 5, 7, or 10 years after you leave. Coinbase, Pinterest, and others publicized longer windows years ago, and it has become a real (if not universal) practice. A longer window means you do not have to decide under a 90-day cash crunch.

There is a tradeoff the company will sometimes mention and sometimes not: extending the window past 90 days for an ISO converts it to NSO treatment for the time beyond 90 days. So an extended window trades the ISO tax profile for flexibility on timing. Which is better depends entirely on your situation, which is another reason to involve a CPA before you act.

What should you ask before you quit?

Do this while you are still employed and have easy access to documents and your equity admin (Carta, Pulley, or similar). It is much harder to chase answers after your access is cut off.

1. 01How many options have actually vested as of my last working day? Get the exact number, not an estimate.
2. 02What is my post-termination exercise window, in writing? 90 days, or longer? Confirm the start date.
3. 03Are my options ISOs or NSOs? This drives the tax and how the window affects you.
4. 04What is the current 409A value and my strike? The spread between them tells you the likely tax hit.
5. 05What does it cost to exercise everything? Strike times vested count. Decide if you can and want to fund it.
6. 06Is there any acceleration or change-of-control language? Rarely triggers on a normal departure, but check.
7. 07Can I get the cap table and plan documents before my access ends? Download them now.

If you are weighing a departure as part of a broader move, the decision is not only about options. When to leave your engineering job covers the timing, and if your reason for leaving is comp or stage, how to evaluate a startup job offer helps you size up where you are going next.