Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question, “Do you pay capital gains on stock options?” And we’re specifically talking about stock options that an employee might get in a company. If you’re an employee of a company and you get stock options, how do they get taxed as gains? Well, there’s two kinds of stock options for employees. There’s nonqualified stock options which are called NSOs and those are usually granted to people who are employees, advisors or potentially consultants to the company and then you have other ones which are incentive stock options which are ISOs which are really only for employees. This might incentivize you to reach a certain quota or to be there a certain amount of time or for your team or your group or your division to reach a certain level or a production level. These are really what kind of tie people’s incentive to the company and to the overall company profitability to their own pay structure. With NSOs which are the nonqualified stock options, you pay ordinary income tax when you exercise the options, when you convert it over and then you pay capital gains tax when you actually sell the shares. You pay ordinary income tax when you say, “Look. I want to exercise this and I want to actually buy stock in the company.” but you won’t pay capital gains until you actually sell the shares. You could exercise your contract, buy stock in the company at a strike price and then you could sell the shares two years later, five years later, whatever the case is. At that point, that’s when you pay the capital gains tax. With ISOs which are the incentive stock options, you only pay taxes when you sell the shares and it’s either ordinary or capital gains depending on how long you’ve held the shares. That’s really going to be case-by-case, but you would only pay the taxes when you actually sell the shares, not necessarily on anything when you actually convert it over. It’s a little bit more advantageous potentially depending on your tax situation maybe to go with an ISO versus an NSO. Anyways, we’re not tax accounts, so obviously, you can’t blow your tax account on this, but we do get a lot of questions on just general stock options as employees, so we want to do this podcast to kind of help bridge that gap. As always, if you guys have any questions, let us know and until next time, happy trading.