The 409A Option Pricing Model (OPM): How It Works and When to Use It

The Option Pricing Model (OPM) is one of the most widely used allocation methods in 409A valuations for venture-backed companies with complex capital structures. This guide explains how OPM works, why common stock is typically valued below preferred stock, the assumptions that drive the analysis, how OPM compares with PWERM and hybrid methods, and what founders, CFOs, and boards should review in an OPM-based 409A valuation report.