In a cashless exercise, your broker exercises your options and sells shares the same moment, using the sale money to pay the exercise price and any tax withholding. With a same-day sale you sell all the shares and keep the leftover cash. With sell-to-cover you sell just enough to pay the costs and keep the rest. It usually needs a public market for the shares. For ISOs, selling the same day is a disqualifying disposition, so the gain is taxed like salary rather than getting the ISO tax break.
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Estimates only. Not tax, legal, or investment advice. See our methodology