Exercise price

In accounting, exercise price means what an option holder pays per share to buy it. Set at least at fair market value on the grant date — the 409A value for a private company — to keep an option outside §409A and, for an ISOEquity & financingIncentive stock optionA stock option meeting IRC §422: employees only, granted under a stockholder-approved plan, strike at least fair market value, exercisable for no more than ten years. No regular tax at grant or exercise (the spread can trigger AMT); gain is capital if the stock is held two years from grant and one from exercise. Only $100,000 of stock, valued at grant, may first become exercisable in a calendar year, inside §422.