The fair value of options is heavily dependent on the strike price to begin with (see [0]). The wording you quoted from TFA is strange at best, and it's inaccur

The fair value of options is heavily dependent on the strike price to begin with (see [0]). The wording you quoted from TFA is strange at best, and it's inaccurate if interpreted literally - an option with a higher strike price is less valuable than an otherwise equivalent option with a lower strike price. If anything, I'd expect later-stage startups to issue options with lower strike prices relative to their current valuation (since they have less remaining growth potential than early-stage startups), which does mean employees at later-stage startups would be more likely to be impacted. For what it's worth, you can get far more upside exposure from $100k worth of options (the maximum tax-free amount per year under this plan) than you'd get from $100k worth of equity if the options are far out of the money. I'm not familiar with the specifics of how option values are calculated for early-stage startups, but I'd expect that a startup worth $20M can issue options with a strike of $100M and report those options at a fair value very close to $0. [0] https://en.wikipedia.org/wiki/Black–Scholes_model#Black–Scholes_formula https://en.wikipedia.org/wiki/Black–Scholes_model#Black–Scho...