Post-termination exercise windows

Two clocks, and the earlier one wins

An option grant has a contractual term, commonly ten years from the grant date. A departure starts a second, much shorter clock: the period during which the holder may still exercise what has vested. Whichever date comes first is the day the options lapse.

Unvested options are a separate matter. They are usually forfeited at termination rather than carried into the window, so the question the window answers is only what happens to the vested balance.

Where the 90-day figure comes from

Ninety days is the common default in US startup option plans, and it has a tax origin: an incentive stock option generally must be exercised within three months of the end of employment to keep ISO treatment. Exercised after that, the option is generally treated as a nonstatutory option, which changes the tax character of the spread, not the right to exercise.

Plans increasingly offer longer windows, sometimes years, and some grants have no post-termination limit at all beyond the contractual term. Longer windows are a deliberate choice with their own consequences: the options stay outstanding and dilutive, and an extended ISO passes out of ISO treatment at the three-month mark regardless.

The window in a particular grant comes from the plan and the award agreement, and it can differ between holders at the same company. Read the document rather than assuming the default.

Record the actual deadline

The departure workflow proposes a deadline 90 days after the termination date, shortened when the grant expires sooner, and lets you replace it with the deadline the agreement states. Clearing the field leaves the grant’s remaining term in force; it does not remove the grant’s expiration.

The app distinguishes the two clocks wherever it names a deadline. An expired grant is described either as the holder’s post-termination window closing or as the grant reaching the end of its term, so the record says which clock ran out. Both appear under Needs attention with the unexercised quantity, so the lapsed options can be cancelled on the right date and the plan’s recycling rules can send the shares where the plan says.

What to review before the window closes

For the departing holder, the vested quantity, the exercise cost, the spread on the exercise date, and the tax character of that spread all matter, and the window is usually too short to work them out late. See Exercise options and issue certificates for the records the app keeps and ISO and NSO stock options explained for the classification.

For the company, review the grant, the departure date, the plan’s treatment of returned shares, and whether anything was extended in writing. An extension is an amendment to the award, not a note in a spreadsheet, and it can change the option’s tax classification.