Stock options are a promise — not yet a share. Tracked correctly, they sit on the fully-diluted view and tell investors how much of the company is committed but not yet issued. Tracked badly, they're the line item investors point at during diligence to ask uncomfortable questions.
What you need first
- An equity incentive plan adopted by the board (the plan document itself, plus the board resolution that adopted it)
- An option pool — the total number of shares reserved under the plan
- 409A valuation (US) or fair market value determination (Canada) to set the strike price legally
Octelligence doesn't issue 409A valuations. You'll need a third-party 409A from a valuation firm before granting options that need defensible strike prices. We support recording the valuation and the strike price; the valuation itself comes from outside the platform.
Step-by-step
Set up the option pool
Go to Cap Table › Option Pool and click Create pool. Enter:
- Plan name (e.g., "2026 Equity Incentive Plan")
- Adoption date (when the board approved it)
- Total shares reserved (e.g., 1,500,000 shares of common)
- Upload the plan document and the adopting board resolution
The pool sits as "available" until you start granting. Each grant moves shares from "available" to "granted."
Grant an option
From Cap Table › Option Grants, click New grant. The form asks for:
- Grantee: employee, advisor, or contractor (must exist in People; add them first if needed)
- Number of options
- Grant date: the date the board approved the grant
- Strike price: usually the most recent 409A valuation's fair market value
- Vesting schedule
- Option type: ISO, NSO, or jurisdiction-specific equivalent
- Expiration: typically 10 years from grant date
Configure the vesting schedule
The most common pattern is 4-year vest with a 1-year cliff, monthly thereafter. Octelligence supports:
- Cliff length: typically 12 months. Nothing vests until the cliff is reached, then 12 months worth vests at once.
- Vest period: total duration. 48 months is standard.
- Vest cadence: monthly (most common), quarterly, or annually
- Start date: usually the employee's start date, not the grant date
You can also configure custom schedules: performance-based vesting, accelerated vesting on change of control (single trigger or double trigger), and milestone vesting for advisor grants.
Generate the option agreement
Octelligence ships a default option agreement template that pulls in the grant details automatically. You can edit the template once, save it as your firm's default, and every future grant uses it.
If you have custom agreement templates from counsel, upload them and they become the default for the corporation.
Send for signature and record execution
The grant becomes effective when the option agreement is signed by both the company and the grantee. Octelligence supports e-signature workflows; when both signatures land, the grant is locked and a signed execution certificate is generated.
What happens at exercise
When a grantee exercises options, three things happen automatically:
- The grantee pays the strike price (recorded as the exercise consideration)
- Shares move from the option pool to the grantee as a new common share issuance
- A share certificate is issued (QR-verified, just like any other certificate)
The option grant transitions to "exercised" status with a record of the exercise event, the consideration paid, and the resulting certificate number. The cap table updates: options-outstanding decreases, common-outstanding increases.
Warrants
Warrants work similarly but aren't tied to the option pool. They're typically issued to investors, banks (as part of debt financing), or advisors as standalone instruments. Go to Cap Table › Warrants to record them with strike, expiration, and underlying share count.
Warrants sit on the fully-diluted view alongside options until they're exercised, expire, or are cancelled.
How options affect your cap table views
Octelligence shows three cap-table views, and options behave differently in each:
- Issued shares only: options are not here. They aren't shares yet.
- As-converted to common: options are not here either. Same reason.
- Fully-diluted: options are here, both vested and unvested, alongside the ungranted pool.
When investors ask about "founder ownership fully diluted," the option pool (granted + ungranted) is part of the denominator. Founders often forget this and overstate their ownership by 10–20 points. Octelligence shows both numbers so you negotiate from accurate ones.
Common gotchas
Granting options before the plan is adopted. A grant before the board-approved plan exists is voidable. Octelligence blocks grants until a plan with a board-approved adoption date is on file.
Strike price below fair market value. Below-FMV ISOs lose ISO tax treatment in the US, and below-FMV options in Canada trigger immediate tax events. Use the most recent 409A or FMV determination. Octelligence warns if you set a strike below the most recent recorded valuation.
Forgetting the cliff. A 4-year vest with a 1-year cliff means nothing vests for the first year, then 25% vests on day 365. Some founders accidentally configure monthly vesting from day one (1/48 each month). That's a real difference and the employee will eventually notice.
Post-termination exercise windows. By default, a departing employee has 90 days to exercise vested options or they expire. Some companies extend this (Pinterest famously extended to 7 years). Configure the post-termination exercise period at the plan or grant level — Octelligence supports both.
Granting more than the pool allows. If you try to grant 200,000 options against a pool with only 50,000 available, the grant is blocked until you increase the pool (which requires a board resolution Octelligence prompts you to record).
What investors and counsel review
During diligence, options are one of the most-examined sections of the corporate record. Reviewers will look for:
- Adopted equity incentive plan with board resolution
- Each grant: board approval, option agreement signed by both parties, vesting schedule that matches the agreement
- 409A or FMV determination supporting each grant's strike price
- Reconciliation between options-granted and pool-available
- Exercise history with consideration recorded
- Any unusual vesting (acceleration, milestone-based, performance-based) documented
Octelligence generates a complete options pack on demand: pool, grants, exercises, and supporting documents. That's the standard ask in a Series A diligence checklist.