How to Execute a Cash Exercise
Cash Exercise is one of the most commonly used exercise types. With cash exercise, you purchase the shares at the option price with ready cash or with cash obtained to cover exercise cost, tax withholding and fees by liquidating assets or borrowing, and receive shares in your brokerage account.
1. To process a cash exercise, log into your Carta account, and click the ‘Portfolio’ tab at the top of the screen. In your portfolio, there will be a section for “Option Grants” under Holdings; from that section, determine the option you wish to exercise, then the exercise type “Cash Exercise” from the dropdown menu on the right.
2. If the information in your profile is not current, you can update it. Clicking the ‘Update Account’ link will take you to your Profile page, which will allow you to update the information by clicking the grey ‘Edit’ button at the top right.
3. Enter the number of options you would like to exercise or select “Exercise all” to fill the field with the maximum exercisable quantity. Once a value has been entered, the schedules that follow for ‘cost to exercise’, ‘tax withholdings’, and ‘option income’ will populate with calculations based on the number of shares entered in the field.
4. If the option being exercised is an NSO, you will be asked if you were an employee of the company. If you were, selecting ‘Yes’ will display dropdowns that will allow you to select your City and State of residence, and inputting those values will populate the page with tax withholding information. The amounts listed here are the maximum allowable withholding amounts; after you submit the exercise, the company will have the ability to adjust these amounts from their end, if necessary, to the actual amounts that should be withheld.
5. Clicking the checkbox below certifies that you agree to the withdrawal of funds from your account.
6. Clicking ‘Sign and Exercise’ will generate the signature modal, which displays the underlying documentation for your review. If you agree to the terms in the documents, click the checkboxes, and type your name in the signature line as it appears below
7. Clicking ‘Exercise Option Grant’ will finalize the exercise request. Once it has been finalized, the line item in your portfolio will show as ‘exercise in progress’, and no further action is required.
***all screenshots in this article reference data from a demo site; none of the information displayed relates to any real-world companies, people, or holdings.