Fidelity.com Help - Fidelity.com Help (2024)

A stock option is the opportunity, given by your employer, to purchase a certain number of shares of your company's common stock at a pre-established price (the grant price). Employers may subject stock options to a vesting schedule (the period of time you must wait before you can exercise a stock option).

Stock Option Basics

• What are the types of stock options?
• What are the tax implications of ISOs?
• What are the tax implications of NSOs?
• Is a stock option the same thing as a share of the issuer's stock?
• Do stock options expire?
• Can I use an option more than once?
• Do options pay dividends?
• What happens to my stock options if I leave my employer?

Grants and Exercises

• How do I accept or decline a grant?
• How do I exercise an accepted grant?

Summary and History Information

• What kind of summary information can I view for stock option plans?
• What kind of detail can I view on particular stock options?
• How is the total value of exercisable options calculated?
• What is the vesting schedule?
• What is the expiration date?
• What kind of history information can I view for stock option plans?
• How do I view my plan information and documents?

Order Information

• What kind of order information can I view for stock option plans?
• How can I cancel a pending exercise order?

Related Help Topics

STOCK OPTION BASICS

What are the types of stock options?

There are two types of stock options, classified by their tax status.

• Incentive Stock Options (ISOs) meet the IRS requirements for special tax treatment. With ISOs, you do not have to pay regular income taxes at the time you exercise, but you must hold your shares at least one year from the date of exercise and two years from the grant date in order to receive special taz treatment.
• Nonqualified Stock Options (NSOs) are traditional stock options that do not meet certain IRS requirements affording you special tax treatment. With NSOs, you are taxed when you exercise the stock options. The IRS levies ordinary income tax, social security tax, and Medicare taxes on the difference between the fair market value when you exercise the stock options and the grant price.

What are the tax implications of ISOs?

• If you decide to sell your stock option shares after the waiting period, you will be subject to a capital gains tax on the difference between the sale price and the grant price
• If you sell your shares prior to the specified waiting period, the shares you sell are subject to a disqualifying disposition which generally requires you to pay income tax on the difference between the fair market value at the time you exercise the options and the grant price
• If you sell your shares on the same day as you exercise them, Fidelity will withhold the option cost and send it to your company. The remaining proceeds minus taxes and fees will be deposited into your brokerage account.

What are the tax implications of NSOs?

NSOs do not meet certain IRS requirements that allow you special tax treatment. With NSOs, you are taxed when you exercise the stock options. You pay ordinary income and Medicare taxes and are subject to Social Security tax if you have not paid the yearly maximum on the difference between the fair market value at exercise and the grant price.

What is the difference between a stock option plan and stock purchase plan?

A stock option gives an employee the right to purchase stock at a predetermined price, regardless of the fair market value of the stock. A stock purchase option, available through an Employee Stock Purchase Plan, gives an employee the right to purchase company stock, sometimes at a predetermined discount from the fair market price. Although the plans are similar, they are not the same.

Both kinds of plans can be either qualified for special tax treatment or unqualified. Both can be offered to an exclusive group of participants as in the case of non-qualified Employee Stock Purchase Plans, or to all full-time employees under qualified plans.

Is a stock option the same thing as a share of the issuer's stock?

No. A stock option gives you the right to purchase the underlying shares represented by the option for a future period of time at a pre-established price.

Do stock options expire?

Stock options do expire. The expiration period varies from plan to plan. Once your options expire, they are worthless. There are often special rules for terminated, retired, and deceased employees. These life events may accelerate the expiration. Check your plan rules for details about expiration dates.

Can I use an option more than once?

No. Once a stock option has been exercised, it cannot be used again.

Do options pay dividends?

No. Dividends are not paid on unexercised stock options.

What happens to my stock options if I leave my employer?

There are usually special rules in the event you leave your employer, retire, or die. See your employer's plan rules for details.

GRANTS AND EXERCISES

How do I accept or decline a grant?

See Accepting and Declining Grants for details.

How do I exercise an accepted grant?

See Exercising Stock Options for details.

SUMMARY AND HISTORY INFORMATION

What kind of summary information can I view for stock option plans?

The Summary page for stock option plans displays information about grant totals, unaccepted grants, and accepted grants. From this page, you can view detailed information about a particular grant, accept or decline unaccepted grants, exercise accepted grants, or estimate the gain on a particular grant.

What kind of detail can I view on particular stock options?

You can view vesting schedule information, stock option details, and the option's current estimated value.

How is the total value of exercisable options calculated?

The total value of exercisable options is equal to the previous business day's closing price minus the grant price multiplied by either the total options or exercisable options or 0, whichever is greater. The actual value at exercise may vary.

What is the vesting schedule?

The vesting schedule is a schedule of dates on which you receive the right of ownership for a specific number of stock options awarded as part of a stock option grant. The vesting schedule for stock options is defined in the grant agreement you sign when you accept a stock option grant. For example, say you were granted 1,000 stock options on February 1, 2004. The vesting schedule may state that 200 of the options will be vested on February 1, 2008, another 200 options will be vested on February 1, 2009, another 200 on February 1, 2010, etc.

What is the expiration date?

The expiration date is the date on which your agreement expires. It is the date, according to the terms of your grant agreement with your company and your company's stock plan, after which you can no longer exercise your grant. Under certain provisions of the stock plan and grant agreement, such as a change in employment status, the expiration date may be accelerated.

What kind of history information can I view for stock option plans?

You can view a history of all transactions for your stock option plan for the past 10, 30, 60, 90, or 120 days. Transactions appear in reverse chronological order, but you can also sort the list of transactions by transaction type, grant ID, grant date, or quantity. You can view details pertaining to accepted and declined grants.

For transactions older than 120 days, view Statements/Records under Accounts & Trade > Portfolio on Fidelity.com

How do I view my plan information and documents?

Click View > Plan Information and Documents. For accepted grants, you can also click View Details under Actions for a grant, then click View Plan Document or View Grant Agreement on the View Details page. You can also view your plan document and grant agreement when you accept or decline an unaccepted grant.

Your plan information and documents are in PDF format. You must have the free Acrobat^® Reader^® to view and print the plan document.

ORDER INFORMATION

What kind of order information can I view for stock option plans?

For stock options, orders are open exercises. You can see all open exercises for your account, as well as exercises which are pending cancelation. Details include quantity, symbol, grant ID, grant date, grant type, fair market value description, and other order details.

How can I cancel a pending exercise order?

If an exercise order is still open, you can submit a request to cancel by clicking Attempt to Cancel next to the order on the Pending Exercises page. To submit the request, review the information on the Review & Submit Cancel Order page, and click Next. The Confirmation page displays a unique confirmation number for your cancelation request.

Note that the confirmation number does not indicate that your exercise order has actually been canceled, only that a cancelation order has been placed. Your cancelation order is subject to prevailing market conditions and prior execution of your original order. To check the status of your cancelation request, return to the Pending Exercises page.

Related Help Topics

• Accepting and Declining Grants
• Exercising Grants