Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Exercise price definition

What does Exercise price mean? In practice, the exercise price (also called the strike price) is the contractually agreed price at which the holder of an option may buy (call) or sell (put) the underlying asset when exercising the option. It is a descriptive market and contractual term rather than a defined statutory concept, although it is used in legislation, tax guidance and regulatory materials concerning derivatives and employee share plans. It is typically fixed on grant or determined by a formula in the option terms, and is commonly subject to anti-dilution or capital reorganisation adjustments (for example, share splits, consolidations or rights issues). In...

Cashless Exercise of Employee Share Options in the UK: Legal, Tax, PAYE/NICs, Consumer Credit and Financial Assistance Considerations (EMI/CSOP)

Published by a LexisNexis Share Incentives expert

Practice notes

What is a cashless exercise of options?

The term ‘cashless exercise’ of options, sometimes called a ‘cashless exercise facility’, describes a method for exercising share options on the basis of an undertaking by the option holder to settle the Exercise price (and often any income tax and National insurance contributions (NICs) payable by the option holder on the exercise of the option) out of the sale proceeds of the Shares obtained on exercise.

This might involve selling all of the acquired shares, or disposing of only so many shares as are needed to meet the exercise price and, where relevant, any income tax and NICs due at that time.

In essence, a cashless exercise facility lets the option holder exercise an option without having to provide the exercise costs themselves up-front, removing the need to fund those amounts in advance.

Note that such a facility is usually only workable where a sufficient number of shares are sold immediately after exercise (or within a period of no more than about one week) so that enough up-front cash is raised from selling those (or other) shares to fund the aggregate exercise price in full.

Why are cashless exercises used?...

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Web page updated on 21/05/2026

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