Definition The exercise window (or exercise period) is the period during which a person can buy shares at the strike price. Options are only exercisable for a fixed period of time, until they expire, typically seven to ten years as long as the person is working for the company. But this window is not always open.
danger Expiration after termination: Options can expire after you quit working for the company. Often, the expiration is 90 days after termination of service, making the options effectively worthless if you cannot exercise before that point. As we’ll get into later, you need to understand the costs, taxes, and tax liabilities of exercise and to plan ahead. In fact, you can find out when you are granted the options, or better yet, before you sign an offer letter.
important Longer exercise windows: Recently (since around 2015) a few companies are finding ways to keep the exercise window open for years after leaving a company, promoting this practice as fairer to employees. Companies with extended exercise windows include Amplitude, Clef, Coinbase, Pinterest, and Quora. However, the 90-day exercise window remains the norm.
controversy The exercise window debate: Whether to have extended exercise windows has been debated at significant length. Some believe extended exercise windows are the future, arguing that a shorter window makes a company’s success a punishment to early employees.
Key considerations include:
A note on advisors: Options granted to advisors typically vest over a shorter period than employee grants, often one to two years. Advisor grants also typically have a longer exercise window post termination of service, and will usually have single trigger acceleration on an acquisition, because no one expects advisors to stay on with a company once it’s acquired. Typical terms for advisors, including equity levels, are available in the Founder/Advisor Standard Template (FAST), from the Founder Institute.