Exercising a stock option or stock appreciation right means purchasing the issuer’s common stock at the grant price, regardless of the stock’s price at the time you exercise the grant.

Order Types, Conditions, and Limitations

Canceling and Settling Exercises

Tax Implications

ABOUT EXERCISE ORDERS

How do I exercise a grant?

On the Summary page for a stock option plan, click Exercise & Sell or Exercise & Hold next to an accepted grant. In a stock appreciation rights plan, click Exercise Grant or SAR Exercise next to an accepted grant.

For an exercise and hold stock option order, or for a stock appreciation rights exercise order, enter the quantity of shares to exercise and click Next to preview the order. Review the exercise order, then click Next to submit the order (Previous to edit the order, Cancel to cancel the order). The Confirmation page displays a unique confirmation number for your exercise order, and the date on which proceeds will be deposited in your Fidelity Account. For an exercise and sell stock option order, enter the order details and Federal tax withholding information (see Order Types, Conditions, and Limitations below for more information). Click Next to preview the order. Review the exercise order, then click Next to submit the order (Previous to edit the order, Cancel to cancel the order). The Confirmation page displays a unique confirmation number for your exercise order.

What do exercise and hold and exercise and sell mean?

Exercise and hold is a form of stock option or stock appreciation rights exercise in which you exercise your option to acquire shares of your company stock and hold the stock. When you do this, you need to have funds available (through cash on deposit, or available margin to borrow against other securities in your Fidelity Account) to pay the exercise cost and required tax withholding (if applicable).

Exercise and sell is a form of stock option exercise in which you exercise your option to acquire shares of your company stock and sell the stock immediately. The cash proceeds from the sale are used to pay the exercise cost, required tax withholding, and brokerage commissions and fees.

What is the fair market value of an option?

Fair market value is the value at exercise of the shares you obtain by exercising your options. Fair market value is specified in your employer’s stock option plan and is used to determine your taxable gain and withholding taxes for NSOs or the alternative minimum tax for ISOs. For an order to exercise stock options, the fair market value will be one of the following:

How can I estimate the gain on an exercise?

Click Act > Estimate Gain to estimate what your proceeds would be if you exercise a certain number of options, or how many options you would need to exercise in order to receive a certain dollar amount or number of shares. You must identify the grant price, the estimated fair market value per share, and the withholding tax rate for NSO grants. The default withholding tax rate represents the estimated total combined taxes on your income (e.g. federal, state, local, capital gains taxes, etc.).

Since the Estimate Gain page is a planning tool, the information you enter and select can be for currently vested stock options or for stock options that may become vested in the future. Your estimated proceeds will not include any applicable commissions or fee amounts.

When is my exercise submitted to Fidelity?

When you click Next on the Review & Submit for Exercise page, you are agreeing that the exercise information is correct, and you are authorizing Fidelity to execute the exercise on your behalf.

What trade verification and confirmation do I receive online?

When you exercise a grant online, you always see a Review & Submit for Exercise page. Review this page carefully before submitting the exercise. Once you submit the exercise, you see a Confirmation page displaying the exercise details. You can print this confirmation for your records.

When can I place exercise orders?

Orders can be entered 24 hours per day and 7 days per week. Orders entered during non-market hours will be processed the next available market day. For exercise and hold orders, you must have the cash available to purchase the stock options in your account.

What are blackout dates and when are they used?

Blackout dates are periods with restrictions on exercising stock options or rights. Blackout dates often coincide with the company’s fiscal year-end, dividend schedules, and calendar year-end. For more information on your plan’s blackout dates (if any), see the company’s plan rules.

How does vesting affect when I can exercise my options or rights?

Your plan may have a vesting period that affects the time you have to exercise your options or rights. A vesting period is time during the term of the grant that you have to wait until you are allowed to exercise it. For example, if the term of your grant is 10 years, and your vesting period is 2 years, you may begin exercising your vested options or rights as of the second anniversary date of the grant. This essentially means you have an 8-year time frame (the exercise period) during which you can exercise your options or rights.

What is a disqualifying disposition?