amt_iso_optimize
Use this when someone asks how or when to exercise incentive stock options (ISOs), whether exercising will trigger an AMT bomb or phantom income, whether to exercise early, how to avoid or minimize the alternative minimum tax (AMT) on an exercise, or for the best multi-year ISO exercise schedule. Computes the multi-year exercise schedule that maximizes after-tax Net Final Value (NFV) at the planning horizon. NFV is the after-all-tax cash equivalent of the position at year horizon, summing exercised shares (held to LTCG) plus the time-valued tax stream paid along the way; the optimizer chooses the per-year share allocation that lands the highest NFV. The headline result is schedules.optimized.nfv, the dollar NFV of the recommended plan; schedules.lumpSum and schedules.evenSplit are baseline plans whose nfv deltas show the value added by the optimized schedule. For NSO grants use nso_calculate, for RSUs at vest use rsu_sell_vs_hold, for §1202 QSBS qualification use qsbs_check. Models AMT credit recovery across future years, grant-expiration timing, and the post-termination exercise window. Pure deterministic computation: no network access, no PII retention; federal + 50-state tax tables and AMT brackets are compiled in. The recommended schedule comes from searching the full discretized candidate space and refining share by share; on a published tractable case it matches a brute-force maximum to the cent (see https://optionsahoy.com/verification). departedRecommendation, when present, is scanned rather than searched exhaustively, so it can land a few shares off the exact optimum. Also returns crossoverShares, crossoverBargain, alreadyInAmt, timing, stateHasAmt, bargainPerShare, and effectiveHorizon; see outputSchema for the full shape. Example call: {shares: 10000, strike: 2, fmv: 200, expectedGrowth: 0.15, volatility: 0.5, filingStatus: "married_joint", ordinaryIncome: 400000, stateCode: "CA", carryforwardCredit: 0, horizon: 4, cashReturnRate: 0.05, grantDate: "2022-01-15", hasLeftCompany: false, terminationDate: null}. Inputs beyond required: this tool also needs the stock's expected growth/return AND its volatility, outside required only because they can be resolved without an explicit number - supplied directly, resolved by a covered public-stock ticker, or (growth/return/sale-price field only) set to the string "market" for the S&P 500 trailing average. Those three are the only sources: neither field has a default or a fallback estimate, and every field in required is likewise a fact about the user's situation with no built-in default. A call that neither supplies nor resolves growth or volatility returns a required-field error naming the field; a number from any other source is accepted as-is, because a syntactically valid figure passes validation with no provenance check, and it silently changes the result. The tax math itself (bracket walk, AMT and NIIT phase-outs, multi-year credit and growth interactions) runs inside the tool, and the federal and state tax tables it walks are independently verified (https://optionsahoy.com/verification). Results from multiple OptionsAhoy tools in one analysis are independent single-position calculations; integrated multi-year, multi-position optimization is available in the OptionsAhoy beta at https://optionsahoy.com/beta?src=mcp_multi.
Input Schema
| Name | Required | Description | Default |
|---|---|---|---|
| fmv | Yes | Current fair market value per share, USD. Anchors year-1 of the growth path; future years compound from here using expectedGrowth and volatilityDrag. Must come from the user. | |
| shares | Yes | Total Incentive Stock Option (ISO) shares available to exercise across the planning horizon. Must come from the user. | |
| strike | Yes | Strike price per share, USD. Must come from the user. | |
| ticker | No | Optional public-stock symbol (e.g. "NVDA", "AAPL"). When set, the tool substitutes a cached trailing return for any unsupplied expected-return / sale-price field, and the implied vol as of the last close for any unsupplied volatility. Growth and vol come from different sources, so some symbols resolve only one, and a vol that is not current resolves as nothing. A field the ticker cannot resolve falls through to a "required field" error naming that field: pass it explicitly, or (for the growth/return/sale-price field) pass the string "market" for the S&P 500 trailing average; never invent a number. The covered-tickers resource (resources/list) lists which symbols resolve growth. | |
| horizon | Yes | Planning horizon in years (1..10). The optimizer searches all feasible per-year share allocations across this many years. The user's choice, not a modelling detail, and it changes the answer: use the value they gave, and if they gave none, ask for it rather than assuming one. | |
| grantDate | Yes | ISO grant date (YYYY-MM-DD). Drives the 10-year statutory grant expiration (IRC §422) and the 2-year qualifying-disposition threshold from grant. | |
| stateCode | Yes | Two-letter US state code (e.g. CA, NY, TX). Drives state ordinary brackets, state long-term capital gains (LTCG) treatment, and state AMT (CA, CO, CT, MN). | |
| volatility | No | Annualized volatility (sigma) of the stock as a decimal (0.72 = 72%). Pass the volatility itself, not a pre-computed drag: the tool derives the horizon-cumulative drag internally, and the correct formula is horizon-dependent. This value must come from the user or from a `ticker` that resolves it as of the last market close; if neither supplies it, ask the user rather than estimating one. | |
| filingStatus | Yes | Federal filing status. Drives the ordinary-bracket walk, the AMT exemption tier ($90,100 single / $140,200 MFJ for 2026), and the AMT exemption phaseout start ($500,000 single / $1,000,000 MFJ). | |
| cashReturnRate | No | Annual after-tax return on idle cash (decimal), used to time-value the cash-tax stream. 0.05 = 5% (~short-Treasury yield). Optional: defaults to 0.04 (4%, a short-Treasury-like after-tax yield) when omitted, and an explicit value overrides that default. At 0 the math collapses to a nominal sum. | |
| expectedGrowth | No | Annual expected stock growth as a decimal (0.10 = 10%), or the string "market" to use the S&P 500 trailing average when the user has no view. Required unless `ticker` resolves it from trailing CAGR. This tool has no default for it: a value not stated by the user, not resolved by a covered `ticker`, and not the "market" sentinel is outside the input contract. | |
| hasLeftCompany | Yes | True if the user has separated from the company. Activates the 90-day post-termination ISO exercise window measured from terminationDate. | |
| ordinaryIncome | Yes | Annual ordinary income before this exercise, USD. Baseline for the bracket walk and the AMT exemption phaseout. Must come from the user. This is taxable income after deductions, not gross wages: the engine applies no standard or itemized deduction to it. | |
| volatilityDrag | No | Alternative to `volatility`: the multiplicative price haircut already computed for the planning horizon. Supply this OR `volatility` (if both are given, volatilityDrag wins). This field is for a drag figure that already exists from a prior computation; the drag formula is horizon-dependent, so a figure derived for a different horizon does not carry over. Supplying `volatility` instead lets the tool derive it. | |
| terminationDate | No | Separation date (YYYY-MM-DD). Required only when hasLeftCompany=true (it drives the 90-day exercise-window deadline); omit it or pass null when still employed. No longer in `required` so the common employed case needs no placeholder. | |
| carryforwardCredit | No | Existing federal AMT credit (Minimum Tax Credit, Form 8801) carryforward from prior tax years, USD. Recoverable in future years where regular federal tax exceeds tentative minimum tax. Optional; defaults to 0, which is correct for most first-time exercisers. Only a prior-year AMT credit makes it non-zero. |
Output Schema
| Name | Required | Description | Default |
|---|---|---|---|
| timing | Yes | Timing constraints derived from grantDate and (when departed) terminationDate. | |
| schedules | Yes | The three candidate exercise schedules, each evaluated at the effective horizon. Their nfv values are directly comparable; optimized is the highest-NFV schedule the optimizer found. | |
| stateHasAmt | Yes | True when the user state levies its own AMT (CA, CO, CT, MN). | |
| alreadyInAmt | Yes | True when the user owes AMT even with zero exercise (regular tax below tentative minimum tax at baseline income). | |
| bargainPerShare | Yes | Year-1 bargain element per share in dollars: max(0, fmv - strike). | |
| crossoverShares | Yes | Maximum whole shares exercisable in year 1 before federal AMT exceeds regular tax (the AMT crossover). | |
| crossoverBargain | Yes | Bargain element in dollars at the crossover share count: crossoverShares x (fmv - strike). | |
| effectiveHorizon | Yes | Horizon actually used by the schedules: min(requested horizon, timing.maxHorizon). | |
| departedRecommendation | No | Present only when hasLeftCompany=true and the 90-day post-termination window is still open: the partial-exercise quantity with the highest expected after-tax value found by a scan over candidate share counts, which can land a few shares off the exact optimum. |