Stock option valuation and Black-Scholes
Your options are worth more than the current spread. Understanding option value stops you from exercising too early.
Intrinsic vs time value
Intrinsic value is fair market value minus strike. Time value is the extra worth of holding an option that can benefit from upside without downside — and it disappears the moment you exercise.
What Black-Scholes says
The model prices an option from the current price, strike, time to expiry, volatility and interest rate. High volatility and long remaining life make holding the option more valuable than owning the share.
The practical takeaway
Exercising converts an asymmetric instrument into a symmetric one. Do it because you want the tax treatment or the shares — not because the option is 'in the money'.
Educational content, not tax advice. Your outcome depends on your grant documents, income and state. Equity Tax Engine models your actual position — join the waitlist.