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With ISOs, for most of us, the best approach is not to exercise until you're ready to sell. In short, as long as your options aren't about to expire, sit on them. However, if you leave the company, you normally have 90 days to exercise. This can make for a nasty problem if the company is not yet publicly traded; you will need some other assets to be able to pay the AMT. In such situations, perhaps the best course of action is not to exercise unless the company is clearly on track for a "liquidity event" (an IPO or acquisition), as evidenced by strong revenue growth, AND you have another source of funds to pay the AMT.

Don't think of the AMT as something that could strike without warning, like lightning. It is absolutely possible to protect yourself against it as long as you understand the rules, or get advice from someone who does. Make sure to look into it before exercising any options.

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