Are there any risks in executing a cashless exercise?
A cashless exercise can reduce the risk in exercising a stock option as you lock in sale price as the tax liability is triggered. You essentially produce enough proceeds by locking in your sales price to cover the tax liability at the time the tax liability is generated. Any further movement in the stock has no effect on your transaction. This is different from an exercise and hold, where you trigger a tax liability but do not execute a sale. Should the stock price decline significantly while holding the stock, you may have a tax liability that is greater then the value of your held stock.
