In the .COM bubble, many, many employees got crushed by exercising and holding options that were in the money when they exercised. 'Accountants and politicians

In the .COM bubble, many, many employees got crushed by exercising and holding options that were in the money when they exercised. 'Accountants and politicians were inundated with horror stories' [0]. The crushing happened when the stock price subsequently crashed below what their option price was. That circumstance meant they were liable to pay tax on the capital gain from exercising, but, did not have enough equity in the shares to cover the tax liability. Generally, only exercise if the shares are in the money and 1) you are immediately going to sell or 2) the options are expiring. If you're going to exercise and hold, sell enough to cover your tax liability. See an accountant if the amounts are 'large' relative to your financial situation. If they are expiring and in the money and the company is private, talk to your HR department about selling enough shares back to the company to cover the tax liability. Seek professional advice if the amount is material for you. Schwab has some good common-sense advice[1] [0] https://www.chicagotribune.com/sns-tech-taxes-story.html https://www.chicagotribune.com/sns-tech-taxes-story.html [1] https://www.schwab.com/resource-center/insights/content/understanding-risks-employee-stock-options https://www.schwab.com/resource-center/insights/content/unde...