Stock Options and RSUs

Equity pay splits into options, the right to buy at a strike, and RSUs, shares delivered at vest, taxed differently and carrying different risk.

Overview

At startups, options dominate, with four-year vesting, a one-year cliff, and the tax minefield of incentive options and the alternative minimum tax; the 83(b) election deadline is the classic costly mistake. At public tech companies, RSUs dominate, taxed as income at vest, effectively a deferred cash-like bonus in stock. Stacking refresh grants makes senior engineers' compensation lumpy and stock-price-dependent, and advisors warn at concentration above a fifth to a third of net worth. 2022's drawdown repriced thousands of packages downward.