Corporate & Executive Services

How to Participate   |  Frequently Asked Questions

Option Exercise

If you have been granted options through your company’s stock option program and are ready to exercise, William Blair & Company can help you with your transaction with little or no cash outlay. If you would like to exercise your options and hold the stock, we can help with that too. Below is a summary of the choices you have regarding your options.

Option Opportunities

Exercise your options and sell the stock (cashless option exercise)

You may exercise your stock options to buy your company stock and sell the stock at the same time without using your own cash. This is referred to as a cashless option exercise. The proceeds you receive from this transaction are equal to the net proceeds of the stock sale (number of shares x price per share) minus the grant price, any required tax withholding, brokerage commissions, and fees. The advantage of the cashless option exercise is that your account receives the sales proceeds upon your exercise without any outlay of cash on your part. Just as is the case with an individual who exercises and holds the stock, you will be required to recognize ordinary income on the gain upon exercise of your options.

Example:
Let's assume you have an option to buy 1,000 shares of XYZ Corporation common stock at $15 per share when the stock is currently trading for $50 per share. If you were to execute a cashless option exercise, you would end up with $35,000 (less taxes, brokerage commissions, and fees) in your account, which can be reinvested or sent to you.

Market Price
1,000 shares at $50 per share = $50,000
Exercise Price
1,000 shares at $15 per share = $15,000
Net Difference = $35,000*
*Prior to taxes, commissions, and fees

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Exercise your options and hold the stock

To own shares of your company's stock to take advantage of ownership, such as voting privileges and dividends, you may choose to exercise your stock options and then hold the stock. Depending on the type of option, you may need to deposit cash or borrow funds on margin using securities in your William Blair & Company account as collateral to pay the option cost, brokerage commissions, fees, and taxes.

Example:
Consider our previous example where you have the option to buy 1,000 shares of XYZ Corporation common stock at $15 per share when the stock currently trades for $50 per share. With your company's stock-option-exercise program, you would pay $15,000 to acquire the 1,000 shares. You would then take possession of $50,000 worth of company stock, have voting rights, participate in market appreciation, and be able to collect dividends, if offered, by the company. However, you would recognize $35,000 ($50,000 - $15,000) as ordinary income on which you would have to pay tax.

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Hold your stock options

You can choose to hold your current options until just before expiration. You will be able to take advantage of appreciation in your company's stock (assuming the stock price has increased) while deferring taxes to the period you exercise the options. Your investment professional can explain and assist you with this easy process.

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Printable Option Exercise Brochure (PDF)

 

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