When you leave a company, your stock option agreement typically gives you around 90 days to exercise your vested options, though some plans offer more. After that window closes, they expire. Unvested options are usually forfeited entirely. For early employees sitting on a large spread between their strike price and the current value, that's a high-pressure deadline.

Between exercise costs and taxes, you may need to come up with six or seven figures for shares in a company that may still be years from a liquidity event. And not exercising means walking away from equity you earned.

Some companies have started extending post-termination windows to two, five, or even ten years, though the option's total term generally can't exceed ten years from the grant date. That helps with the cash pressure, but there's a tax catch. If you exercise an ISO more than 90 days after leaving, it no longer receives ISO tax treatment — the exercise is taxed as if it were an NSO, meaning ordinary income tax on the spread at exercise. The extension gives you more time, but the favorable tax treatment doesn't follow it.

The difference isn't always as clean as "ISO good, NSO bad." ISOs avoid regular income tax at exercise, but the spread still counts toward AMT. The real impact depends on the size of the exercise, your other income, and whether you're already in AMT territory.

There are exceptions. If you early exercised your options while still employed and filed an 83(b) election, the 90-day window doesn't apply — you already own the shares (though unvested shares may still be subject to repurchase). If you leave due to disability or death, the ISO window typically extends to one year. And some grant agreements include repurchase rights, particularly on unvested shares, that let the company buy them back when you leave.

Before the clock starts, it helps to know: how much of your liquid net worth the exercise would require, whether you can cover the tax without selling other assets, and what your conviction level is on the company's trajectory. In some cases, secondary markets or company-sponsored tender offers can provide liquidity to help fund the exercise, but they're not guaranteed and usually require company approval. There's no universal right answer, but the window doesn't leave much room to figure it out.

For educational purposes only. Not tax, legal, or investment advice.