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🇺🇸 US · Vesting & exercise

Early exercise

Also called: early exercising, exercise before vesting

In one line

Exercising options before they've vested, where the plan allows it, usually paired with an 83(b) election to start the tax clock early.

In plain English

Some plans let you buy your shares before they vest. Done early, when the spread is small or zero, it can minimise tax and kick off your capital-gains holding period sooner — but your money is now at risk in an illiquid company.

If you were explaining it to a 5-year-old

You pay for all your future chocolate squares up front while they're cheap, betting they'll be worth more later — but you can't get your coins back if you leave.

Why it matters when you sell

Early exercise can set up far better tax outcomes for a future sale, at the cost of putting cash in early and taking on risk.

Related terms

83(b) electionExercise (options)VestingLong-term capital gainsRepurchase right

Put it to use

83(b) election calculator · Cost to exercise + AMT

Hold private-company shares? Our free estimator shows what your stake could be worth and whether you can sell — no sign-up. Value my equity (free) → · Back to the glossary →
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Sources

Primary references for this term: US SEC / Investor.gov, IRS (US tax). Our definitions are written in plain English and kept evergreen — see the glossary methodology. General information, not advice.

Educational information only — not financial, tax or legal advice, and not an offer to buy or sell any security. Definitions are general; your own documents and local law govern your situation. PrivateTechShares is independent and not a broker or marketplace.