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Downturn Stock Option Strategies

In times of market uncertainty, it is essential for investors to know how to safeguard their holdings and ensure a comfortable retirement effectively. When investing, it’s crucial to remember market cycles and the value of diversity, but what if your company has given you stock options? 

Options are often best exercised during market downturns because of the decreased tax burden. In addition, if the uncertain economy threatens your employment, you may need to work out as soon as possible to avoid losing the chance altogether. Discuss your best course of action with a certified financial analysis for Herndon businesses specialist. Keep the following in mind when considering what to do with your stock options during a down market.

Tell me about the stock options you’ve been granted.

There is no uniform taxation system for stock options. To calculate how much money you might save by selling your options when their value is low, you must first know how you will be taxed on your equity pay.


Incentives in the form of incentive stock options (ISOs) are a common type of equity compensation for employees because of the favorable tax treatment they receive. The bargain element refers to the difference between the employee’s purchase price (or the striking price) and the shares’ current fair market value. The bargaining aspect of ISOs is not taxed directly but is factored into the alternative minimum tax (AMT) computation.

One alternative form of equity compensation is nonqualified stock options (NSOs). Employees, third-party providers, contractors, board members, and other business partners may be awarded NSOs. A portion of the NSO exercise’s value is considered a bargain and is subject to wage taxation.

Do you have the option of working out before work?

Find out if your employer permits early exercise (using stock options before they’ve vested) if you have stock options that have not yet vested. Early exercise can often result in significant tax savings for employee shareholders, regardless of market conditions. The bargain aspect in pre-IPO companies is usually low, and it is even less likely to be present when the market is in bear territory.

Morning Workouts with the Number 83 (b)

The tax benefits of early exercise require filing Section 83(b) election within 30 days of the exercise date. If you choose to report the bargain element for tax purposes at the time of exercise instead of when the shares vest, you must file Form 83(b).