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My wife & I are in a high (36%) tax bracket (but live in a state with no income tax) and have quite a few non-qualified stock options from her employer. When I was taught Black-Schole in school, they said hold on to options as long as possible. Now, as I look at the tax consequences of exercising, I am wondering if it isn't better to exercise sooner rather than later, in order to pay less of the gain as income and more as long-term capital gains, especially if you would hold onto them for the long term anyway.

I realize I may need some professional advise here, but I'd like to mull over the problem first.

Is my analysis anywhere close to the mark?

Since this effort would cost a bit of money, it would probably curtail other investing activities; what kind of numbers would I have to see to make exercising early preferable to, say, FF investing?

Would I be better off exercising later options (higher strike price), earlier options (lower strike price) or is it irrelevant?

Are there any other factors I should consider?

Is there a book I should pick up that might talk about these "problems"?
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