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πΊπΈ US · Vesting & exerciseEarly 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 β 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 β 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
Put it to use
83(b) election calculator · Cost to exercise + AMT
When you're ready to go deeper, there's an optional Equity Toolkit and Report.
Sources
Primary references for this term: US SEC / Investor.gov, IRS (US tax). Our definitions are written in plain English and kept evergreen β see the glossary methodology. General information, not advice.
Educational information only β 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.