{"id":320,"date":"2026-01-04T00:00:00","date_gmt":"2026-01-04T00:00:00","guid":{"rendered":"https:\/\/springgreen-curlew-885344.hostingersite.com\/blog\/rsu-vs-stock-options\/"},"modified":"2026-06-19T05:37:41","modified_gmt":"2026-06-19T05:37:41","slug":"rsu-vs-stock-options","status":"publish","type":"post","link":"https:\/\/lastroundai.com\/blog\/rsu-vs-stock-options","title":{"rendered":"RSU vs Stock Options: The Guide I Needed Before My First Tech Offer"},"content":{"rendered":"

My first offer letter said “50,000 stock options.” I had no idea what that meant. Was I rich? Could I retire? Turns out, those options ended up being worth exactly $0 when the startup died. My second offer had RSUs instead. Very different outcome.<\/p>\n

If you’re confused about RSUs vs stock options, you’re not alone. Here’s everything I wish someone had explained to me.<\/p>\n

The One-Sentence Difference<\/h2>\n
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Stock Options<\/h4>\n

The right to buy<\/strong> company stock at a set price in the future. You have to pay to exercise them.<\/p>\n<\/div>\n

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RSUs (Restricted Stock Units)<\/h4>\n

A promise to give you<\/strong> actual stock shares once they vest. No purchase required.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n

Stock Options Explained (Like You’re 5)<\/h2>\n

Let’s say a company gives you 10,000 stock options with a “strike price” of $1 per share.<\/p>\n

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How Stock Options Work<\/h4>\n
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  1. 1. You get options<\/strong> – The company says “you can buy 10,000 shares at $1 each, anytime after they vest.”<\/li>\n
  2. 2. They vest over time<\/strong> – Usually 4 years with a 1-year cliff (25% after year 1, then monthly).<\/li>\n
  3. 3. The stock price changes<\/strong> – Maybe it goes to $10 per share.<\/li>\n
  4. 4. You exercise (buy)<\/strong> – You pay $1 x 10,000 = $10,000 to buy the shares.<\/li>\n
  5. 5. You sell (hopefully)<\/strong> – If the stock is at $10, your shares are worth $100,000. Profit: $90,000.<\/li>\n<\/ol>\n<\/div>\n
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    The Upside<\/h4>\n<\/div>\n

    If the stock price goes way up (10x, 100x), your options can be worth a fortune. Early employees at companies like Google and Meta became millionaires this way.<\/p>\n<\/div>\n<\/div>\n

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    The Downside<\/h4>\n<\/div>\n

    If the stock price stays flat or goes down below your strike price, your options are “underwater” – literally worthless. This happens more often than the success stories.<\/p>\n<\/div>\n<\/div>\n

    RSUs Explained (Also Like You’re 5)<\/h2>\n

    RSUs are simpler. The company says “we’ll give you actual shares over time.”<\/p>\n

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    How RSUs Work<\/h4>\n
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    1. 1. You get a grant<\/strong> – The company says “you’ll receive 1,000 shares over 4 years.”<\/li>\n
    2. 2. They vest over time<\/strong> – Usually quarterly or annually after a cliff.<\/li>\n
    3. 3. You get actual shares<\/strong> – When they vest, shares land in your brokerage account.<\/li>\n
    4. 4. You can sell immediately<\/strong> – Or hold. Your choice.<\/li>\n<\/ol>\n<\/div>\n
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      The Upside<\/h4>\n<\/div>\n

      RSUs always have value (unless the company goes to $0). Even if the stock drops 50%, your RSUs are still worth something.<\/p>\n<\/div>\n<\/div>\n

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      The Downside<\/h4>\n<\/div>\n

      Less upside than options. If the stock goes 10x, you make 10x. With options at a low strike price, you could make 100x. RSUs are the “safer” play.<\/p>\n<\/div>\n<\/div>\n

      Side-by-Side Comparison<\/h2>\n
      \n\n\n\n\n\n\n\n\n\n\n\n
      Factor<\/th>\nStock Options<\/th>\nRSUs<\/th>\n<\/tr>\n<\/thead>\n
      You pay to own<\/td>\nYes (strike price)<\/td>\nNo<\/td>\n<\/tr>\n
      Value if stock drops<\/td>\nCould be $0<\/td>\nStill worth something<\/td>\n<\/tr>\n
      Upside potential<\/td>\nHigher<\/td>\nLower<\/td>\n<\/tr>\n
      Risk<\/td>\nHigher<\/td>\nLower<\/td>\n<\/tr>\n
      When taxed<\/td>\nExercise + Sale<\/td>\nVesting + Sale<\/td>\n<\/tr>\n
      Common at<\/td>\nStartups<\/td>\nPublic companies<\/td>\n<\/tr>\n
      Complexity<\/td>\nHigher<\/td>\nLower<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n

      The Tax Situation (Important!)<\/h2>\n
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      I’m Not a Tax Advisor<\/h4>\n<\/div>\n

      This is general information. Talk to a CPA or tax professional before making decisions about exercising options or selling RSUs.<\/p>\n<\/div>\n<\/div>\n

      RSU Taxes<\/h3>\n

      RSUs are taxed as ordinary income when they vest. If you receive $50,000 in RSUs that vest, that’s $50,000 added to your income for the year.<\/p>\n