Business · Startup equity
Stock option exercise cost calculator.
What does it cost to exercise your options, and what is the spread over the current value? You enter the strike and the value per share. Everything runs in your browser.
Exercising 10,000 options with a strike of $1.20 costs $12,000. If the fair market value you were given is $3.50 a share, the spread is $2.30 a share, or $23,000 on paper. At a sale price of $10.00 a share the gain would be $88,000 before tax.
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The two numbers
Every stock option has an exercise price, also called the strike price, which is the price at which a share can be bought. In the US the exercise price is typically set at the fair market value of the stock on the grant date. If the share price is above the exercise price, the option is "in the money"; below it, the option is "out of the money" and exercising would lose money (Cooley GO).
Cost to exercise = options x strike. Spread = options x (fair market value - strike). The spread is a paper figure: it is not cash until you can sell, and it is not what you keep after tax. The employee's benefit is the difference between the market price and the exercise price (Wikipedia).
Worked example
10,000 options, strike $1.20, fair market value $3.50. Cost = 10,000 x 1.20 = $12,000. Spread per share = 3.50 - 1.20 = $2.30, so the spread is 10,000 x 2.30 = $23,000; the shares are worth $35,000 on paper, so the cost is 34.3% of that value. If the shares later sell at $10.00, the proceeds are $100,000 and the gain over the exercise cost is $88,000, before tax. If the fair market value were below the $1.20 strike, the options would be underwater and the spread negative.
Limits
You supply the fair market value; this calculator does not know the right number. It also ignores tax, fees, post-termination exercise windows, early exercise, vesting, and what happens if the company never has a sale. How a spread or a sale gain is taxed (including 409A valuations, 83(b) elections and incentive stock options in the US) depends on your jurisdiction and the type of option, and is left to a qualified professional.
Sources, opened 8 October 2026: Cooley GO glossary, Exercise Price (strike price definition; in the US typically set at fair market value at grant; in the money and out of the money); Wikipedia, Employee stock option (the employee exercises, pays the exercise price and receives shares; the benefit is the difference between the market and exercise prices).
Frequently asked questions
How do you calculate the cost to exercise stock options?
Multiply the number of options by the strike price. 10,000 options at $1.20 cost $12,000 to exercise.
What is the spread on stock options?
It is the fair market value per share minus the strike price, times the number of options. At $3.50 value and $1.20 strike on 10,000 options, the spread is $23,000.
What does underwater mean?
An option is underwater, or out of the money, when the share value is below the strike price. Exercising would cost more than the shares are worth.
Where do I find the fair market value?
Ask your company; this tool does not look it up. It only does the arithmetic on the number you enter.
Is the spread what I get after tax?
No. The spread is before tax and before any ability to sell. Tax rules such as 409A, 83(b) and incentive stock options depend on your jurisdiction and are for a professional.
Educational only. Not legal, tax or investment advice.
Planning and learning aid only. Real terms depend on the signed documents and your jurisdiction. Tax treatment (409A valuations, 83(b) elections, ISOs and similar) is left to a qualified professional. Amounts are in any one currency; the symbol is only a label.