Cashless Exercise

AAA

DEFINITION of 'Cashless Exercise'

A transaction that is used when exercising employee stock options (ESO). Essentially, what you do here is borrow enough money from your broker to exercise the options. You then simultaneously sell enough shares to pay for the purchase, taxes, and broker commissions.

INVESTOPEDIA EXPLAINS 'Cashless Exercise'

What you are doing is technically called buying on margin. The brokerage lets you buy on margin in this case because they know there will be a quick repayment. The advantage of this technique is you don't need the cash on hand.

RELATED TERMS
  1. Vesting

    The process by which employees accrue non-forfeitable rights ...
  2. Grant

    The issuance of an award, such as a stock option, to key employees ...
  3. Non-Open Market

    Describes an agreement to purchase or sell shares made directly ...
  4. Employee Stock Option - ESO

    A stock option granted to specified employees of a company. ESOs ...
  5. Employee Stock Ownership Plan - ...

    A qualified, defined contribution, employee benefit (ERISA) plan ...
  6. Exercise

    To put into effect the right specified in a contract. In options ...
Related Articles
  1. How To Buy Oil Options
    Options & Futures

    How To Buy Oil Options

  2. The Economics of Hulu, Netflix, Redbox ...
    Investing News

    The Economics of Hulu, Netflix, Redbox ...

  3. How To Become A Corporate Board Member ...
    Personal Finance

    How To Become A Corporate Board Member ...

  4. Top 6 Ways To Recession-Proof Your Job
    Personal Finance

    Top 6 Ways To Recession-Proof Your Job

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center