How Can I Pay for My Stock Options? A Complete Guide to Options Financing

For many startup employees in the US and Israel, stock options represent the most powerful—and most confusing—part of their compensation. As companies mature, employees often reach a point where they need to make a major financial decision:

“How can I pay for my options?”

At first glance, paying for your options seems simple: just cover the strike price. But as companies raise more capital and 409A valuations climb, the real cost becomes much larger. Between strike prices, tax obligations, and tight exercise windows, employees increasingly need support to exercise without taking on serious personal financial risk.

This guide breaks down the true cost of exercising options, the challenges US and Israeli employees face, and how options financing can help.

The Real Cost of Exercising Stock Options

The cost of exercising options involves two components:

1. Strike Price

This is the amount you pay to convert your options into shares. At early-stage companies, strike prices tend to be low. But in later-stage startups—especially in Israel’s strong mid-to-late-stage ecosystem—strike prices can be substantial.

2. Taxes

This is where most of the financial burden lies.

United States (ISOs & NSOs)

• ISOs may trigger the Alternative Minimum Tax (AMT).
• NSOs create ordinary income tax based on the spread between strike price and current fair market value (409A).

For many US employees, the tax bill can be larger than the strike price itself.

Israel (Section 102 and other plans)

• Under Section 102 Capital Gains Track, tax is generally deferred until sale—but only if the shares remain with the trustee for the full holding period.
• Under Ordinary Income Track, or with non-102 grants, exercising can trigger immediate tax obligations, even without liquidity. This is unusual.
• In later rounds, the valuation gap between strike and fair market value can make taxes significant.

These realities are why employees increasingly seek ways to exercise without taking on major personal financial risk.

Why Employees Ask: “How Can I Pay for My Options?”

Several situations force employees to consider exercising:

• Leaving the company (90-day exercise window in the US; variable in Israel)
• A rising 409A valuation
• Preparing for long-term capital gains treatment
• Upcoming tenders or secondary opportunities
• Extending trustee holding periods (Israel)
• Expiring options
• Desire to lock in ownership without risking personal savings

Across both the US and Israel, the underlying issue is the same:Exercising has become too expensive for most employees to fund on their own.

Paying for Options

Common Ways to Pay for Your Options

1. Using Personal Savings (Self-Funding)

The most straightforward—but often least realistic—approach.

Pros:

• You keep 100% of your upside.

Cons:

• High cost and high risk.
• Potentially large tax bill.
• Concentrates most of your net worth in a single private asset.

This is becoming less feasible as valuations rise.

2. Tender Offers and Secondary Sales

If your company runs a tender offer or allows a secondary sale, you may be able to sell shares immediately after exercising.

Pros:

• Can exercise without using personal savings.

Cons:

• Tender windows are infrequent and unpredictable.
• You may need to sell more shares than you prefer to stay cash-neutral.

In Israel, tenders have become more common, but volume and eligibility vary significantly across companies.

3. Loans or Credit Lines

Some American lenders offer loans secured by private company shares.This is far less common in Israel due to the difficulty of valuing private equity for collateral.

Pros:

• Provides liquidity.

Cons:

• Recourse loans put personal assets at risk.
• Non-recourse loans often require giving up a portion of future upside.
• Not widely accessible, especially outside the US.
  

Taking a credit line to fund options

4. Options Financing

This is the fastest-growing solution for employees in the US and Israel.

Options financing provides the funds to:

✅ Pay the strike price
✅ Cover tax obligations
✅ Exercise safely and early
✅ Without risking personal capital or taking on personal liability

In return, the financing partner receives a portion of the future upside only if the company eventually has a liquidity event.

Pros:

• No upfront cash needed
• No personal liability
• Preserves significant ownership
• Works with both US plans and Israeli Section 102 structures
• Allows employees to start the long-term capital gains clock (in the US)
• Helps Israeli employees navigate trustee and tax timing

Cons:

• You share a portion of future gains—but only if the exit succeeds.

For most mid-to-late-stage employees, this is often the only realistic way to participate in upside without risking large personal savings.

Why Options Financing Matters More Now — In Both the US and Israel

Private markets have shifted. Many late-stage private rounds in the US and Israel are still being priced at 20x revenue or higher, while recent IPOs—such as Via, eToro, and Navan—listed at far lower multiples.

This creates challenges:

• Investors hesitate to exit below their last-round valuation
• IPO timelines extend
• M&A outcomes often don’t reach employee value
• Yet employees still owe strike + taxes long before liquidity arrives

Options financing helps employees bridge the gap between paper value and real financial risk.

Final Thoughts

If you’re asking “How can I pay for my options?”, you’re not alone. Employees in the US and Israel are facing some of the most complex equity decisions ever—rising valuations, uncertain liquidity timelines, and high tax exposure.

Options financing gives employees a way to exercise without risking their savings:

✅ No upfront cash
✅ No personal liability
✅ Maintain meaningful ownership
✅ Works smoothly across US and Israeli equity plans
✅ Avoid losing your options when leaving a company
✅ Position yourself for long-term upside safely