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Cashless Exercise
What Does Cashless Exercise Mean? 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 Links
- MyStockOptions.com - the most extensive stock option site out there. Includes calculators, articles, discussion boards and more.
- Our View On Stock Options - In this piece, David Harper wades deep into the option expensing ruling and what this really means to investors.
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