Exercising stock options means purchasing shares of a companys stock at a set price, regardless of the stocks price at the time you exercise the option. When you exercise your stock options, you own a piece of the company, and youre hoping for the value of the shares to increase so you can sell them for more than you paid. However, exercising your stock options is not a guaranteed way to make money, and you should consult a tax advisor before exercising.

Here are some things to consider when exercising stock options:

• Vesting: Unless your company allows early exercising, you can only exercise options that have vested.
• In the money or underwater: It only makes sense to exercise your options if they have value. If they do, theyre known as "in-the-money." This happens when the strike price (or exercise price) of your stock options is lower than the market price of your company shares trading on the exchange. If theyre currently underwater (worth less than your exercise price), it may not make sense to exercise right now.
• Company performance: Consider how the company is doing before exercising your stock options.
• Tax implications: Exercising your stock options can have tax implications, so its important to consult a tax advisor before exercising.
• Choices: Usually, you have several choices when you exercise your vested stock options, such as holding your stock options, exercising your stock options to buy shares of your company stock, then selling just enough of the company shares to cover the stock option cost, taxes, and brokerage commissions and fees, or initiating an exercise-and-sell transaction (cashless) .

In summary, exercising stock options means purchasing shares of a companys stock at a set price, and its important to consider various factors such as vesting, company performance, tax implications, and choices before exercising.