RSUs vs Stock Options: What Developers Need to Know

Equity compensation has become one of the biggest perks in tech jobs. For many developers, the promise of stock-based pay is just as important as salary and bonuses. Whether you’re joining a fast-growing startup or a global tech giant, you’re likely to encounter terms like RSUs (Restricted Stock Units) and Stock Options in your offer letter.

At first glance, both RSUs and stock options might look like free shares of the company. But in reality, they work very differently, and those differences can dramatically impact your financial future. For developers, understanding the nuances of equity compensation can mean the difference between building wealth through company growth or ending up with shares that are worth little to nothing.

In this guide, we’ll take a deep dive into RSUs vs stock options. You’ll learn:

• The definitions and mechanics of RSUs and stock options.

• The key differences in vesting, taxation, and long-term value.

• Which type of equity might be better depending on your career stage and company type.

• Practical examples and real-world scenarios that show how developers are affected.

• Frequently asked questions developers often have when negotiating or managing their equity.

“Equity compensation is not just about ownership—it’s about understanding how and when that ownership creates real financial value.”

By the end of this article, you’ll know exactly what RSUs and stock options are, how they impact your taxes, and how to make smarter financial decisions about your compensation package.

What Are RSUs?

Restricted Stock Units (RSUs) are one of the most common forms of equity compensation offered by tech companies, especially mid-size and large firms like Amazon, Google, or Microsoft. Unlike stock options, RSUs do not give you the option to buy shares. Instead, they are promises from the company to give you actual company stock once certain conditions—usually called vesting requirements are met.

How RSUs Work

When a company offers RSUs, they’re essentially saying: “We’ll give you X number of shares in the future, but you have to earn them by staying with the company for a set period of time.”

• Grant Date – This is when the company commits to giving you the RSUs.

• Vesting Schedule – The timeline for when the RSUs officially become yours.

• Settlement – Once vested, RSUs are converted into company stock, which you can typically sell or hold.

For example, if a developer is granted 1,000 RSUs with a 4-year vesting period, they might vest:

• 25% (250 shares) after the first year (known as the cliff).

• The remaining 75% (750 shares) spread out over the next three years, usually monthly or quarterly.

Why Companies Use RSUs

Companies, especially large and stable ones, prefer RSUs because:

• Simplicity – They’re easier to explain than stock options.

• Guaranteed Value – Once RSUs vest, they have value, even if the stock price has dropped.

• Retention Tool – Employees are motivated to stay long enough to see their RSUs vest.

Advantages of RSUs for Developers

• No Purchase Required – Unlike stock options, you don’t need to pay a strike price to own the shares.

• Less Risk – Even if the stock price decreases, vested RSUs are still worth something.

• Stability – Common in well-established companies where stock prices are relatively steady.

Quick Snapshot: RSUs in Practice

Case Study: When Amazon hires developers, RSUs make up a significant portion of their total compensation. Even if Amazon’s stock dips slightly, those vested RSUs retain value, making them a reliable wealth-building tool for employees.

What Are Stock Options?

Stock options are another popular form of equity compensation, especially in startups and early-stage companies. Unlike RSUs, stock options don’t immediately give you shares of the company. Instead, they give you the right to buy shares at a fixed price, called the exercise price or strike price, after they vest.

This means that stock options only become valuable if the company’s stock price goes above the strike price. If the stock price never exceeds that level, the options may expire worthless.

How Stock Options Work

• Grant Date – The company promises you a certain number of options.

• Vesting Schedule – Options become exercisable over time (often over 4 years with a 1-year cliff).

• Exercise – Once vested, you can buy the shares at the strike price, regardless of the market price.

• Sale – If the company’s stock is worth more than your strike price, you can sell for a profit.

For example, suppose a developer is granted 5,000 stock options at a strike price of $10 per share. If, after vesting, the company’s stock is trading at $50 per share, the developer can:

• Exercise all 5,000 options at $10 each ($50,000 total).

• Immediately sell them at $50 each ($250,000 total).

• Profit: $200,000 before taxes.

Types of Stock Options

There are two main categories:

1. Incentive Stock Options (ISOs)

   • Typically offered to employees.

   • Can qualify for favorable tax treatment if specific conditions are met.

   • Often preferred by developers at startups due to potential tax benefits.

2. Non-Qualified Stock Options (NSOs or NQSOs)

   • Offered to employees, consultants, or advisors.

   • Do not qualify for special tax treatment.

   • Taxes are generally higher compared to ISOs.

Why Companies Offer Stock Options

Startups and high-growth companies often use stock options to:

• Conserve Cash – Instead of paying high salaries, they offer potential upside through equity.

• Incentivize Growth – Employees are motivated to help the company grow because their stock options gain value only if the company’s stock price increases.

• Reward Risk Tolerance – Developers willing to join a startup early may reap big rewards if the company succeeds.

Advantages of Stock Options for Developers

• High Upside Potential – If the company succeeds, options can be extremely valuable.

• Alignment with Company Growth – Your financial gain directly ties to company performance.

• Negotiation Leverage – In startups, options can sometimes be negotiated for a bigger share.

Quick Snapshot: Stock Options in Practice

Case Study: An early engineer at Google received stock options at a very low strike price before the IPO. When Google went public, their options became worth millions, a life-changing windfall. But not all stories end this way—many employees at startups walk away with worthless options if the company never grows or exits.

RSUs vs Stock Options: Key Differences Developers Should Know

For developers evaluating a job offer, understanding the  is critical. While both are forms of equity compensation, they operate differently and carry unique risks and rewards. Let’s break it down.

Ownership vs. Option to Buy

• RSUs give you actual shares once they vest. No purchase required.

• Stock Options give you the right to buy shares later at a fixed strike price.

For developers, this means RSUs guarantee ownership, while stock options require you to invest your own money to benefit.

Value Certainty vs. Growth Potential

• RSUs have guaranteed value as long as the stock is worth something. Even if the stock price falls, vested RSUs retain value.

• Stock Options can generate much higher profits if the company grows significantly, but they can also expire worthless if the stock price never rises above the strike price.

Developers in stable, big tech companies benefit more from RSUs, while startup developers may prefer stock options for the upside potential.

Vesting and Expiration Rules

• RSUs: Shares are delivered to you as they vest. Once vested, you own them outright.

• Stock Options: You must exercise them before they expire (typically 90 days after leaving the company). Unexercised options are lost.

For developers switching jobs, RSUs are generally safer. Stock options require careful planning to avoid losing them.

Tax Treatment

• RSUs are taxed as ordinary income when they vest. Taxes are usually withheld automatically, like salary.

• Stock Options have complex tax rules:

  • ISOs may qualify for favorable tax treatment (capital gains) but risk triggering AMT (Alternative Minimum Tax).

  • NSOs are taxed as ordinary income at exercise, plus potential capital gains at sale.

Developers often underestimate the tax complexity of stock options, while RSUs are simpler but offer less flexibility.

Dilution and Company Stage

• RSUs are more common in mature, stable companies (Google, Microsoft, Amazon). They’re used to retain talent and provide predictable value.

• Stock Options dominate in early-stage startups because they allow companies to issue equity without immediate cash costs.

Developers in startups need to evaluate whether the potential upside justifies the risk.

Quick Comparison: RSUs vs Stock Options

Quote from a Senior Developer at Microsoft:
“When I joined, my RSUs became a guaranteed part of my compensation. I didn’t have to worry about exercising them or losing money. But when I was at a startup earlier in my career, I had stock options. They could’ve made me a millionaire, but the company folded, and they became worthless.”

Tax Implications of RSUs vs Stock Options

When it comes to compensation, it’s not just what you earn—it’s what you keep after taxes that matters. Both RSUs and stock options come with very different tax rules, and developers who don’t understand them can face huge, unexpected bills.

How RSUs Are Taxed

• Taxed as Ordinary Income: When your RSUs vest, the value of the shares on that day is considered income.

• Automatic Withholding: Most companies automatically withhold taxes, often by selling some of the vested shares.

• Capital Gains on Sale: If you hold the RSUs after vesting and the stock price rises, you’ll pay capital gains tax when selling.

Example:

• You receive 1,000 RSUs.

• On vesting day, the stock price is $100.

• Value = $100,000 → taxed as ordinary income.

• If you hold them and later sell at $150 per share, the extra $50,000 profit is taxed as capital gains.

RSUs are straightforward but can push developers into higher tax brackets since the entire vested value counts as income.

How Stock Options Are Taxed

Stock options are more complex, especially because there are two main types:

1. Incentive Stock Options (ISOs)

• No taxes at grant or vesting.

• Taxes apply at exercise (if you hold the shares).

• If you meet holding period rules (2 years from grant, 1 year from exercise), gains are taxed as long-term capital gains instead of ordinary income.

• However, ISOs can trigger AMT (Alternative Minimum Tax) if exercised but not sold.

2. Non-Qualified Stock Options (NSOs or NQSOs)

• Taxed at exercise: The difference between strike price and fair market value is considered ordinary income.

• Additional capital gains taxes apply when you later sell the shares.

Quick Tax Comparison

Tax Planning Tips for Developers

1. Don’t Ignore RSU Withholding

   • Companies often withhold at a flat rate (e.g., 22% in the U.S.). But if your RSU vesting pushes you into a higher tax bracket, you may owe more when filing your return.

2. Be Strategic with Stock Options

   • Exercising too early or too late can have massive tax consequences. Developers often use strategies like early exercise or sell-to-cover.

3. Work with a Tax Advisor

   • Equity compensation is one of the most complex areas of taxation. A professional can help you avoid costly mistakes.

4. Plan for AMT (with ISOs)

   • Many developers are caught off guard when ISOs trigger AMT. Understanding this before exercising is crucial.

Quote from a Financial Planner for Tech Employees:
“I’ve seen developers make life-changing gains with stock options—but I’ve also seen them owe six-figure tax bills because they didn’t plan ahead. Taxes can make or break your equity windfall.”

Which Is Better for Developers: RSUs or Stock Options?

There’s no one-size-fits-all answer to the RSUs vs stock options debate. The best choice depends on a developer’s career stage, financial goals, and the type of company they’re joining. Let’s break it down.

When RSUs Are Better

RSUs tend to work best for developers who value stability and predictability in their compensation.

• Big Tech Companies – Companies like Amazon, Microsoft, and Meta rely heavily on RSUs to retain talent. Their stock prices are stable enough that RSUs are a guaranteed form of wealth-building.

• Risk-Averse Developers – If you prefer guaranteed value over potential upside, RSUs are the safer bet.

• Mid to Late Career Professionals – Developers who want to protect their earnings and retirement savings often prefer RSUs since they don’t require cash outlay or risky speculation.

When Stock Options Are Better

Stock options are more attractive when a developer is willing to take on higher risk for higher reward.

• Startups & Early-Stage Companies – Options are common here because they align employee incentives with company growth. If the company IPOs or gets acquired, early employees can make life-changing money.

• Risk-Tolerant Developers – Those willing to gamble on the company’s success may prefer the potential upside of options.

• Early Career Developers – Younger employees often have more flexibility to take risks, making options a better fit.

Factors Developers Should Consider

Before choosing between RSUs and stock options, developers should weigh these key factors:

1. Company Stage & Stability

   • RSUs = Better for mature companies.

   • Options = Better for startups with growth potential.

2. Risk Tolerance

   • Do you want guaranteed value (RSUs) or are you willing to take on risk for potential upside (options)?

3. Financial Flexibility

   • RSUs don’t require you to spend money.

   • Options require cash to exercise and can create tax liabilities even before you sell.

4. Exit Strategy

   • If the company IPOs, both RSUs and options can be lucrative.

   • If the company stays private or fails, options often lose value while RSUs still retain some.

Quick Decision Guide

Case Study:

• Maria, a senior developer at Microsoft, received RSUs worth $200,000 over four years. Even with stock price fluctuations, her RSUs always had value.

• Alex, an early engineer at a startup, received stock options with a strike price of $1. When the company went public at $50 per share, his options turned into millions.

These examples highlight the trade-off between stability and upside potential that every developer must weigh when deciding between RSUs and stock options.

Common Questions Developers Ask About RSUs vs Stock Options

Developers often face confusion when trying to understand RSUs vs stock options. Below are some of the most frequent questions, along with clear, simple answers that address real-world concerns.

Do I have to pay anything to receive RSUs?

No. RSUs are granted to you for free. Once they vest, you automatically own the shares. The only “cost” is the tax liability when they vest, which companies usually handle by selling some shares to cover taxes.

What happens if I leave the company before my RSUs vest?

Unvested RSUs are forfeited if you leave the company. You only keep the RSUs that have vested up to your last day of employment.

Can I sell RSUs immediately after they vest?

Yes, in most cases. Many developers choose to sell vested RSUs right away to avoid market risk and lock in guaranteed value. However, some may choose to hold if they believe in the company’s long-term growth.

Do stock options expire if I leave a company?

Yes. Most stock options expire 90 days after your last day (though some companies extend this period). If you don’t exercise them before expiration, they are lost.

Can I negotiate for RSUs instead of stock options (or vice versa)?

Sometimes. At big tech companies, equity structure is usually standardized (RSUs only). But at startups, developers often negotiate:

• More stock options for higher potential upside.

• RSUs for lower risk if the company is later-stage.

Which is better for startups: RSUs or stock options?

• Startups usually prefer stock options because they don’t require giving away immediate value.

• RSUs are more common after a company matures or goes public.

What happens to my RSUs or stock options if my company goes public (IPO)?

• RSUs: Continue to vest and can be sold once trading restrictions are lifted.

• Stock Options: You may be able to exercise them before or after IPO. If the stock price rises significantly, this can be very lucrative.

How do layoffs affect unvested RSUs and stock options?

• Unvested RSUs and stock options are usually forfeited.

• Vested RSUs remain yours.

• Vested stock options must typically be exercised within 90 days, or they expire.

Pro Tip: Always review your company’s equity agreement. Terms can differ widely between companies, and the fine print determines what happens in cases of job changes, IPOs, or acquisitions.

Pros and Cons Summary of RSUs vs Stock Options

Both RSUs and stock options can be valuable parts of a developer’s compensation package, but they come with different trade-offs. Here’s a breakdown to help compare them.

Pros and Cons of RSUs

Pros

• Guaranteed Value – Once vested, RSUs are worth something, even if the stock price falls.

• No Cost to You – You don’t pay a strike price to receive them.

• Simple Tax Treatment – Taxed as ordinary income at vesting; no complex AMT issues.

• Stability – Ideal for developers at large, established companies.

Cons

• Less Upside – Limited potential compared to stock options.

• Taxed Immediately at Vesting – You pay taxes on the value when they vest, whether you sell or not.

• No Flexibility – You can’t choose when to recognize income (unlike options).

Pros and Cons of Stock Options

Pros

• Massive Upside Potential – If the company grows or IPOs, stock options can create life-changing wealth.

• Flexibility – You choose when to exercise, giving some control over taxes.

• Alignment with Company Growth – Encourages employees to push for company success.

Cons

• High Risk – If the stock price never rises above the strike price, options expire worthless.

• Requires Cash to Exercise – Developers must pay the strike price, sometimes a significant amount.

• Complex Taxes – ISOs may trigger AMT; NSOs are taxed as ordinary income at exercise.

• Expiration Risk – Options usually expire within 90 days of leaving the company.

Quick Comparison Table

Developer Insight:
“My RSUs at Amazon felt like a second paycheck—steady and predictable. But when I joined a startup later, stock options made me feel invested in the company’s future. The risk was higher, but so was the excitement.”

How Developers Can Negotiate Equity Compensation

When evaluating a job offer, most developers focus on salary. But in tech, equity can be the most valuable part of your compensation package—if you know how to negotiate it. The key is to understand whether RSUs or stock options align with your goals and how to ask the right questions before signing.

1. Ask About the Type of Equity Offered

• RSUs are common in large, public companies like Google, Microsoft, and Meta.

• Stock options are typical in startups or pre-IPO companies.

• Some companies may offer a mix of both.

Ask directly: “Is my equity in the form of RSUs, stock options, or a combination?”

2. Understand the Company’s Stage

• Early-stage startups: Options are riskier but may have huge upside.

• Mid-to-late stage startups: A mix of options and RSUs might be possible.

• Public companies: RSUs dominate because they’re stable and predictable.

 If joining a startup, ask: “What’s the company’s most recent valuation and strike price for options?”

3. Clarify the Vesting Schedule

Typical vesting is 4 years with a 1-year cliff, but companies may negotiate.

• Developers can sometimes negotiate a shorter cliff.

• Senior hires may negotiate front-loaded vesting (more shares vest earlier).

• For retention, some companies offer refresh grants after a few years.

Ask: “Is the vesting schedule flexible or negotiable?”

4. Compare Total Compensation (Salary + Equity)

Sometimes a higher salary is worth more than extra equity—especially if the equity is risky. Developers should ask for both:

• The value of the equity grant today.

• The expected future value based on growth projections.

Ask: “What is the estimated current value of this equity, and how is it calculated?”

5. Negotiate for More Equity

If salary is fixed, equity may be the best area for negotiation. Consider:

• Asking for more RSUs or options.

• Requesting early exercise rights for options.

• Negotiating for performance-based grants or equity refreshes.

Pro tip: Frame your ask as “I’d love to commit long-term to the company—can we explore additional equity to reflect that commitment?”

6. Evaluate the Exit Strategy

Equity is only valuable if you can sell it. Developers should understand:

• Is the company planning to IPO in the near future?

• Has it been acquired before, or is acquisition likely?

• Does the company allow secondary sales of stock?

Ask: “What are the most common liquidity events for employees here?”

Quick Negotiation Checklist

Type of equity (RSUs, stock options, or both)
Strike price (for options)
Vesting schedule
Expiration rules if you leave
Company valuation & growth projections
Refresh grants and bonuses
Liquidity options (IPO, acquisition, secondary sales)

Expert Tip:
Equity negotiation is not just for executives. Even mid-level developers can negotiate for better terms—especially if they have competing offers.

Which Is Better for Developers: RSUs or Stock Options?

There’s no one-size-fits-all answer to the RSUs vs stock options debate. The “better” choice depends on factors like the company’s stage, your financial goals, and your appetite for risk. Let’s break it down.

RSUs Are Better If:

• You’re joining a large, established company (Google, Microsoft, Amazon, etc.).

• You want predictable income—RSUs act like a second paycheck when they vest.

• You prefer lower risk and don’t want to gamble on company performance.

• You value simplicity in taxes and don’t want to manage AMT or exercise decisions.

• You’re planning to stay in the role long enough for vesting to complete.

Stock Options Are Better If:

• You’re joining a startup or high-growth company with big upside potential.

• You’re willing to take risks for a chance at life-changing wealth.

• You have extra cash to exercise options and cover potential taxes.

• You want flexibility in deciding when to exercise or sell.

• You’re confident in the company’s growth trajectory (e.g., approaching IPO).

Side-by-Side Developer Scenarios

A Hybrid Approach

Some companies offer both RSUs and stock options. This setup gives developers the best of both worlds:

• RSUs provide stability and guaranteed value.

• Options offer upside potential if the company performs well.

For developers, a blended package can balance risk and reward, letting them enjoy predictable income while still having a stake in growth.

Bottom Line:
If you value stability and certainty, RSUs are better.
If you want risk and potential huge gains, stock options may be the smarter bet.

Case Studies: RSUs vs Stock Options in Real Life

Real-world scenarios show just how different the outcomes of RSUs and stock options can be. Developers often hear stories of overnight millionaires from stock options, but also of worthless grants. RSUs, on the other hand, tend to be more stable but less dramatic. Let’s explore a few cases.

Case Study 1: RSUs at a Big Tech Company (Google)

Situation:

• A developer joins Google with a $200,000 salary and $100,000 in RSUs, vesting over 4 years.

• Google’s stock is trading at $100/share when the grant is made.

Outcome:

• Each year, $25,000 worth of RSUs vest, taxed as ordinary income.

• If Google stock rises to $150/share in 4 years, the total value of vested RSUs = $150,000.

• Even if the stock fell to $90/share, the RSUs would still be worth $90,000.

Lesson: RSUs provide guaranteed value and act like a stable financial foundation for developers.

Case Study 2: Stock Options at a Startup

Situation:

• A developer joins a Series A startup with a $120,000 salary and 20,000 stock options at a strike price of $1.

• Four years later, the startup IPOs at $20/share.

Outcome:

• Developer pays $20,000 to exercise options (20,000 × $1).

• Sells shares at IPO for $400,000 (20,000 × $20).

• Net profit = $380,000 before taxes.

Lesson: Stock options can create life-changing wealth—but only if the company grows significantly.

Case Study 3: Stock Options Gone Wrong

Situation:

• A developer joins a mid-stage startup with 10,000 options at a $5 strike price.

• The company grows for a while but later fails, with shares trading at $2.

Outcome:

• Options are “underwater”—worthless since stock < strike price.

• Developer walks away with nothing from equity.

Lesson: Options carry high risk. They can expire worthless if the company underperforms.

Case Study 4: Hybrid Compensation (Late-Stage Startup)

Situation:

• A senior developer joins a late-stage startup with $150,000 salary, $50,000 in RSUs, and 15,000 stock options at $10/share.

• Three years later, the company IPOs at $30/share.

Outcome:

• RSUs vest, providing a guaranteed value (~$50,000).

• Options exercised at $10 cost $150,000, but selling at $30/share generates $450,000.

• Total value = $500,000+.

Lesson: A mix of RSUs and stock options offers both stability and big upside.

Developer Takeaways from Case Studies

1. RSUs = Steady income → Safer for those with financial commitments.

2. Options = Risk/reward → Potentially huge gains, but not guaranteed.

3. Mix of both → Best of both worlds for long-term security and upside.

4. Timing matters → Stock market performance and company stage affect outcomes heavily.

Tax Considerations: RSUs vs Stock Options

Taxes can dramatically affect the value of your equity. Many developers underestimate this, only to be surprised by big tax bills later. Let’s break down how RSUs and stock options are taxed in a clear and simple way.

How RSUs Are Taxed

• At Vesting: The value of your RSUs at vesting is treated as ordinary income.

• Payroll Taxes Apply: Federal, state, and FICA (Social Security & Medicare) are withheld, just like a paycheck.

• Capital Gains Tax Later: If you hold onto the shares and sell them later at a higher price, the increase is taxed as capital gains.

Example:

• 100 RSUs vest when stock = $50/share → $5,000 added to your W-2 income.

• If stock later rises to $70/share and you sell → $2,000 is taxed as capital gains.

Key Point: You pay taxes immediately at vesting, even if you don’t sell.

How Stock Options Are Taxed

Stock options are trickier because there are two main types: Incentive Stock Options (ISOs) and Non-Qualified Stock Options (NSOs).

ISOs (Incentive Stock Options)

• No tax at grant or vesting.

• At Exercise: No regular income tax if you hold, but the “spread” (difference between strike price and fair market value) may trigger AMT (Alternative Minimum Tax).

• At Sale: If held for 1+ year after exercise and 2+ years after grant, gains are long-term capital gains.

Example:

• Strike price = $10, stock at exercise = $50 → $40 spread.

• Spread may count toward AMT.

• If stock sold later at $100, profit taxed as capital gains.

NSOs (Non-Qualified Stock Options)

• At Exercise: The spread is taxed as ordinary income.

• At Sale: Any further gain taxed as capital gains.

Example:

• Strike price = $10, stock at exercise = $50 → $40 taxed as income.

• If stock later sold at $100, the extra $50 is capital gains.

Key Point: ISOs are more tax-efficient if held long enough, but NSOs are simpler and more common.

Comparing RSU vs Stock Option Taxes

Developer Pitfalls to Avoid

1. Forgetting to save for RSU taxes – They withhold, but often not enough. You may owe extra at tax time.

2. Exercising options without a sale plan – Developers sometimes exercise too early, get hit with taxes, and then the stock tanks.

3. Not understanding AMT – ISOs can cause unexpected tax bills if not planned carefully.

4. Leaving a company without exercising – Options may expire worthless if you don’t act within 90 days.

Pro Tip: Always consult a tax advisor before exercising stock options. A little planning can save tens of thousands in taxes.

Key Questions Developers Should Ask Employers About Equity

When evaluating a job offer, developers often look at salary first. But equity can make up a significant portion of total compensation—and asking the right questions ensures you know what you’re actually getting. Here’s what you should clarify with your employer or recruiter.

1. What Type of Equity Is Being Offered?

• RSUs → Common at large, public companies. Lower risk.

• Stock Options (ISOs or NSOs) → Common at startups. Higher risk and higher potential reward.

 Ask: “Are these RSUs, ISOs, or NSOs?”

2. What Is the Vesting Schedule?

• Standard: 4 years with a 1-year cliff.

• Variations: Some offer front-loaded vesting, refresh grants, or shorter cliffs.

Ask: “How long until my equity fully vests, and is the schedule negotiable?”

3. What Is the Strike Price (for Options)?

• The strike price determines whether your options are valuable.

• If the stock price never rises above it, the options are worthless.

Ask: “What is the current strike price and fair market value of shares?”

4. What Happens If I Leave the Company?

• RSUs usually stop vesting if you leave.

• Options often expire 90 days after leaving unless extended.

Ask: “How long do I have to exercise options after leaving?”

5. How Is the Company Valued?

• For startups, valuation and growth trajectory matter.

• A high valuation now can make options harder to profit from later.

Ask: “What was the most recent company valuation, and how has it changed over time?”

6. What Are the Liquidity Options?

• For RSUs in public companies → liquidity is immediate.

• For private companies → sales may be limited until IPO or acquisition.

Ask: “Are there opportunities to sell shares before an IPO?”

7. Will I Receive Additional Equity Grants?

• Many companies give refresh grants after a few years.

• This can help offset dilution and retain top developers.

Ask: “Does the company offer refresh equity grants or performance-based awards?”

8. How Will Taxes Be Handled?

• Companies may withhold some taxes on RSUs, but not always enough.

• Developers need to plan ahead to avoid surprise bills.

Ask: “How does the company handle tax withholding for RSUs or options?”

Quick Equity Questions Checklist for Developers

Type of equity (RSUs, ISOs, NSOs)
Vesting schedule and cliffs
Strike price (if options)
Post-termination exercise period
Company valuation and growth trajectory
Liquidity options (IPO, secondary sales)
Refresh grants and bonuses
Tax withholding policies

Developer Reminder: Never be afraid to ask these questions. Employers expect it, and it shows you understand the real value of equity.

FAQs: RSUs vs Stock Options for Developers

Below are some of the most common questions developers ask when comparing RSUs vs stock options. These concise, direct answers are optimized for search engines and quick-read snippets.

1. Do RSUs or stock options have more value?

RSUs generally hold more guaranteed value because they are always worth something once vested. Stock options can deliver higher rewards, but only if the company’s stock price rises above the strike price.

2. Are RSUs safer than stock options?

Yes. RSUs are considered lower risk because you don’t pay to receive them, and they retain value as long as the stock is above $0. Stock options are riskier, since they can expire worthless.

3. How are RSUs taxed compared to stock options?

• RSUs: Taxed as ordinary income at vesting, then as capital gains if sold later at a profit.

• Stock Options:

  • ISOs: No tax at grant or vesting, possible AMT at exercise, capital gains if held long enough.

  • NSOs: Taxed as ordinary income at exercise, then capital gains at sale.

4. Can you lose money with RSUs?

You won’t lose money out-of-pocket, but RSUs may lose value if the company’s stock price falls after vesting. Unlike stock options, you don’t have to pay anything upfront.

5. What happens to RSUs and stock options if I leave my job?

• RSUs: Any unvested RSUs are forfeited. Vested RSUs remain yours.

• Options: Usually must be exercised within 90 days of leaving, or they expire.

6. Which is better for developers at startups: RSUs or stock options?

• Early-stage startups usually offer stock options, which can provide huge upside if the company succeeds.

• RSUs are more common in late-stage startups or after IPO, offering safer, guaranteed value.

7. Can I negotiate equity terms as a developer?

Yes. Developers can negotiate the amount of equity, the vesting schedule, or request extended post-termination exercise periods. Equity isn’t just for executives—developers should negotiate too.

8. Do RSUs or stock options affect my paycheck?

• RSUs: Taxes are withheld at vesting, often lowering your take-home pay during those months.

• Stock options: No effect until you exercise, but you’ll need cash to cover the strike price and taxes.

9. Should I sell my RSUs immediately after they vest?

It depends on your risk tolerance:

• Selling immediately gives certainty and liquidity.

• Holding may give higher returns, but exposes you to stock price drops.

10. Can developers get both RSUs and stock options?

Yes. Many late-stage startups and public companies offer a mix of RSUs and stock options, giving developers both stability and upside potential.

Conclusion

For developers, equity compensation can be one of the most valuable parts of your career earnings—sometimes even more than salary. But the value depends heavily on whether you’re granted RSUs or stock options, and on the financial health of the company you join.

• RSUs are safer, simpler, and act like a second paycheck. They’re best for developers at large, stable companies or those who prefer predictability.

• Stock options are riskier but can create life-changing wealth if the company succeeds. They’re better suited for developers who are comfortable with uncertainty and want to bet on growth.

• A hybrid package that includes both RSUs and stock options often offers the best balance of stability and upside potential.

The key takeaway? Understand your equity before you sign an offer. Ask the right questions about vesting, strike price, valuation, and taxes. And when in doubt, consult a financial or tax advisor—especially when dealing with complex stock option exercises.

Final Note for Developers:
Think of RSUs as a steady foundation, and stock options as a high-risk investment. Both can play an important role in building long-term wealth—if you know how to manage them.

By mastering the difference between RSUs and stock options, you’ll be better prepared to negotiate smarter, reduce risk, and maximize your earnings as a developer.