Stock options are complicated

A 90-day window might be better for you if you want to stick around at a company for a while and there were other people that came before you, but left. "Dead equity" of startup employees who have left but not exercised means that they can let you do all of the work while they dilute the available equity pool (i.e., take money directly out of your pocket). This a16z article goes into this: http://a16z.com/2016/06/23/options-timing/ (Though I'm not saying I agree 100% with their naturally biased position)

An extended exercise window is not an end-all-be-all solution. Other solutions that don't have the dead equity problem include:

1. Actually pay startup employees reasonable salaries and don't pretend their equity is 100% certain to lead to great riches since it is a risk

2. IRS / Congress could fix tax treatment in this situation, since it is not serving the purpose it was intended to (avoid rich people dodging taxes)

3. Startups actually IPO / get liquid faster instead of contributing to our existing private equity bubble where liquidity events are delayed indefinitely, rendering equity useless. More liquid cash flying around is generally better for everyone as long as it's not a dotcom-era bubble.

Employees have just as much of a responsibility to learn this stuff as their employers do to act generally ethically. They're your employer, not your parents.

The two types of options are similar in that they have the same general terms. However, you cannot sell your ISOs on the CBOE, because they differ in details, the most important one being that the exchanges only trade in options for publicly traded companies.

That doesn't mean you can't sell your ISOs to someone else; there just isn't a marketplace for it.

I listened to a software engineering daily episode where this: https://github.com/jlevy/og-equity-compensation#introduction was discussed. Found it cleared some things up.

Everyone hates the AMT; very roughly Democrats think it's a broken tool for addressing a real problem, and Republicans see the problem it addresses as a good thing.

Taxes on income (share value - option strike price) become owing on option exercise.

If the company is not a CCPC (Canadian-controlled private corporation) and the option strike price was less than the share value at grant-time, you may qualify for a 50% deduction (bringing it in line with capital gains), subject to some conditions (arms-length dealing, etc).

If the company is a CCPC, you can defer the taxes until the shares are sold. If sold within 2 years, you pay full income tax. If sold after 2 years of holding, a 50% deduction applies bringing it in line with capital gains. CCPC status of options are grandfathered in so if the company loses CCPC status (e.g. bringing in US investors), your options continue to qualify.

Keep in mind that going bankrupt/company sale are forced sales of your shares, which could hit you with a big tax bill and since that tax bill is income (not cap gains), the capital losses of the sale cannot be used to offset it! If you find yourself in this position, you should contact the CRA. They have forgiven these kinds of errors in the past (Nortel employees, JDS Uniphase) with a special treatment of the gains/losses. No guarantees though.

CCPC employees should also look at the lifetime capital gains exemption (LCGE) of $750000 to reduce taxes on the capital gains following exercise, and the allowable business investment loss (ABIL) which can be used to halve the tax owing in the downside case. In theory, the 50% deductions mentioned above and the ABIL stack to reduce the tax owed to 0. The ABIL can only be claimed if the company is a CCPC when it is wound up; so it's possible to lose the ability to claim the ABIL if e.g. US investors come on board later and get a majority of the company.

All these rules make perfect sense assuming there is easy liquidity, but it's a mess for illiquid shares.