Outstanding options are equity grants that remain active—issued to holders, not yet exercised, expired, or cancelled— and therefore still part of the company’s fully diluted picture.

How it works

When the board approves a grant, those options become outstanding until the holder exercises (pays strike price and receives shares), forfeits unvested portions on departure, or lets them expire after the post-termination window. Cap table software lists outstanding options separately from issued shares and unallocated option pool reserves.

In diligence, investors sum outstanding options with issued stock and available pool to compute fully diluted ownership. At acquisition, treatment varies: vested options may cash out, accelerate, or convert; unvested awards may be assumed or cancelled per the deal terms.

Option exercises increase issued share count and can trigger anti-dilution adjustments on preferred if defined in the charter. Finance teams reconcile outstanding options monthly against cap table software and 409A valuations so grant dates and strike prices stay accurate for tax and reporting.

Departing employees typically have 90 days post-termination to exercise vested options unless the plan allows longer windows. Unexercised options return to the pool after expiration, increasing unallocated reserve.

Why it matters

• Founders: Heavy outstanding options mean more future dilution when exercised. Repricing underwater options changes incentive but has tax and accounting implications.
• Investors: Outstanding options reveal how much of the hiring plan is already committed and whether option overhang will compress returns at exit.

Common mistake

Forgetting that unvested outstanding options still count in fully diluted percentages even though holders cannot exercise yet.

Related ideas

See option pool, option overhang, and vesting schedules.