Employee stock options are designed to comply with the IRS rules for Incentive Stock Options (ISOs), which allow employees to receive and execute options without being taxed on their value; tax is assessed only when the stock is sold. To qualify as an ISO, options have to be exercised within 3 months of an employee leaving the company.<p>The alternative seems to be to use NSOs, or (maybe?) ISOs that turn into NSOs; NSOs have tax implications at the time of exercise, but the point of giving employees NSOs is to allow them to defer exercise, perhaps to a point where the options are liquid (remember: most options aren&#x27;t liquid; that&#x27;s the problem with requiring them to be exercised --- it requires employees to spend money to receive illiquid speculative options).