What Your Stock Options Are Actually Worth

Last updated July 2, 2026

Equity compensation is one of the most misunderstood elements of a job offer. Stock options, RSUs, and employee stock purchase plans all appear as dollar figures in offer letters, but the actual value depends on vesting schedules, strike prices, company valuation, and tax treatment that most employees never fully unpack. Incentive stock options at a private company with a $5 strike price and a current 409A valuation of $12 per share look like $7 per share in value on paper, but that value is entirely illiquid until a liquidity event occurs. Many employees at companies that never go public or get acquired receive nothing despite holding options for years.

For public company RSUs, the math is more transparent. A grant of 1,000 RSUs vesting over four years at a current stock price of $45 is worth $45,000 gross at grant, but only $11,250 per year as it vests, and each tranche is taxed as ordinary income in the year it vests. For non-qualified stock options, the spread between strike price and market price at exercise is taxed as ordinary income. Combined federal, state, and FICA taxes can reduce the realized value by 30 to 50 percent of the gross spread.

Never include unvested equity at face value when evaluating a job offer. Discount private company options significantly for illiquidity risk. For public company RSUs, convert the vesting schedule to an annual dollar figure and apply your marginal tax rate to get the real after-tax annual value. Equity is a meaningful part of compensation, but only if the company reaches a liquidity event and the vesting timeline aligns with your actual tenure.