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.
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Stock Options: ISOs vs. NSOs
What may seem like a bland choice (whether to grant ISOs or NSOs) can have massive tax implications down the road for startup employees and contractors.
