Exercise Price
Definition
The price per share at which an option holder may purchase shares upon exercise of the option. The exercise price must be documented in the grant agreement. The exercise price is typically set at the fair market value of the shares on the grant date. An exercise price below fair market value on the grant date may create tax liabilities for the recipient in certain jurisdictions.
Common Misapplication
The most common misapplication is setting the exercise price without a documented fair market value determination. An exercise price set without a documented basis cannot be verified as compliant with applicable tax rules and creates uncertainty in due diligence.
FFI Standard Reference
This term is defined and applied in Book 3, Section 3.3: The Equity Compensation Standard.
Related Terms
Citable URL
This term may be cited using the following permanent URL.
Full citation format: Founder Financial Infrastructure Standard, Beta v0.5, Glossary: Exercise Price. https://ffistandard.org/glossary/exercise-price/. 2026.