The exercise price (or "strike price") is the price at which a stock option may be exercised. In practice, startups obtain a 409A valuation and then use that valuation to set the exercise price for option grants to service providers. Doing so ensures that the exercise price is equal to the fair market value at the time of the option grant.
A concise guide for startup founders to understand the basics of 409A valuations, when you'll need them, and the risks of not relying on them.
Explore the world of stock options with our informative guide. Compare Incentive Stock Options (ISOs) and Non-Qualified Stock Options (NSOs), and learn why startups choose one over the other.