I had friends that worked at a startup that Cisco acquired. They have options to buy at around $30. So they bought the shares and watched the stock hit $79 but didn't sell. Then the stock dropped to $20 and even though they didn't sell the stock they had to pay taxes because of how the AMT (Alternative Minimum Tax) worked at the time. Even if they sold all the stock they had they couldn't cover the tax bill. Along with the option back dating scandals I think this is one of the reasons all the companies I have worked at since give out RSUs and sell 40% when they vest to pay your estimated tax bill.
You are right. I've worked at 2 startups and we had options and filed Section 83(b) elections and pre bought our stock for $0.001 a share. But both companies failed so I lost about $50
I had options at the 2 companies in 2002 and 2005 but since then the 4 other large publicly traded companies have only given RSUs
