Should you buy your stock options when you quit?

I worked at a company from 2011 - 2013 that gave me the offer to buy out my options. I'm glad I didn't because that company was going out of business. The entire executive leadership team was swapped out 3 times over the course of 6 months by the board and we were getting crushed by competition. It was only a couple thousand dollars but I would have just lost it. The answer to this really depends on your situation and a lot of the points touched on in the post.

TL;DR: No. (Betteridge's Law-compliant!)

Which matches my experience. Think about why you're leaving - probably for reasons which might help predict the company's future.

If the company has not IPO-ed & there are no concrete plans for such an event, then it almost never makes sense to buy your options.

Anecdotes don’t really matter much on this question. What matters is a) what information do you have at the time you quit b) how much capital do you have and c) what is your risk tolerance.

Basically it boils down to your prediction if the stock is going to be worth more than your strike price when it becomes liquid, and if you can tolerate the loss if you predict so and are wrong. Some scenarios this is a very good bet: you were early, your strike price is low, the company has had several valuations well above the strike price, the financials are healthy, and you can absorb the loss if you are wrong. The magnitude of the upside seems like it shouldn’t be a factor, if these are true, if you think the risk adjusted return can beat the market. In most cases where it is sane to exercise your options you’re expecting a multiple return, not a few points, so it basically should be irrelevant how much upside there is in absolute terms, once you’ve determined a full loss is tolerable.

A couple of points

1) "Don’t forget though, you’ll have to pay taxes, because the value of your shares is likely greater than the price you paid to buy them."

This is not true if, like most stock options, yours are ISOs and you don't hit AMT.

2) "I didn’t have enough money"

There are now places that'll loan you money secured against the value of the shares themselves. If the alternative is not exercising the shares at all, this is a pure win (these services eat into your profits, but some is better than 0)

3) "I didn’t have enough time"

It's increasingly common for startups to have much more generous time spans for exercise. The 90 day window is required by law for ISOs, but many companies now autoconvert at the 90 day mark to NQSOs with much longer time spans, up to 10 years in some cases (Stripe, Pinterest, and Flexport are examples). This is something you should ask about before joining a company.

4) "I didn’t think the company would survive"/"I have a low risk tolerance"

These are the only ones that really matter. Like any investment, you gotta weigh the ROI and risk against your preferences.