The strike price (or exercise price) is what you pay per share when you exercise stock options.

How it works

When the board grants options, it sets strike price at or above fair market value on the grant date—usually from a 409A valuation in the US. If the company grows and the market value rises above the strike, the option has intrinsic value. ISOs and NSOs differ in tax treatment, but strike mechanics are the same.

Warrants in venture financings also specify a strike; sometimes it resets in down rounds via repricing or exchange offers.

Why it matters

• Founders: Low strike on early grants rewards early team; later hires get higher strikes reflecting progress.
• Operators: Incorrect 409A or backdated strikes create tax and legal exposure for employees and the company.

Common mistake

Thinking strike price equals company valuation. Valuation is enterprise-level; strike is per-share FMV on a specific date.

Related ideas

409A valuation, option pool, vesting, and fair market value.

When you will see it

Every option grant notice lists strike price and grant date—employees should understand spread versus current 409A, not just headline grant size.

Questions to ask

• When was the last 409A refresh relative to this grant?
• Can early employees early-exercise to start capital-gains clock?
• Do down rounds trigger repricing or exchange offers?

Practical takeaway

Treat strike price as something to define precisely in writing—not assume everyone in the room shares the same meaning. In term sheets, board decks, and LP updates, tie the concept to a concrete decision: a vote, a price input, a fund policy, or a metric formula. When definitions drift, teams misprice risk, miss leverage, or waste cycles on the wrong conversation.