How to Execute a Cashless Hold Exercise
Cashless Hold Exercise is one of the most commonly used exercise types. With Cashless Hold exercise, you are not required to contribute any of your own funds to exercise the stock options. Instead, you will sell a portion of the exercised shares to cover exercise cost, tax withholding and fees, and receive remaining shares, as well as any cash remaining from the covering sale.
1. To process a cashless exercise and hold, 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 “Cashless Exercise and Hold” 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 schedule that follows for ‘Shares to be exercised’ will populate with calculations based on the number of shares entered in the field.
4. Then, select the order type. If you select Market Order, the exercise will execute at the next available price; if you select Limit Order, you will be able to enter a price at which you wish to sell your shares, and the exercise will not process unless the share price matches the limit price (or is better than the limit).
4a. If the option being exercised is an ISO, no taxes will be withheld:
4b. If the option is an NSO, then the workflow will calculate tax withholding, based on the city and state you lived in:
5. Review and confirm the cost breakdown for the exercise. If the option is an NSO, tax information will also be incorporated into the details on this page.
6. If you click ‘Sign and Confirm’, you will be able to view the terms of the stock sale and option exercise, as well as the terms in the underlying documents:
If you agree to the terms, you can sign by clicking into the signature line, and typing your name, as it appears under the line. FInalize the process by clicking ‘Exercise Option Grant’.
7. Once the exercise has been requested, you will see the order to sell shares listed under the ‘Orders’ tab:
and the option will show an ‘Exercise in Progress’, on the Portfolio tab:
***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.