An option, strictly speaking, has an underlying security that already exists. The Safe, like a convertible note, doesn't have an underlying security yet, since the company hasn't created the preferred stock that it would convert into yet.
You're right about securities; the security usually exists prior to offering a contract on it. But even then it gets a little more complicated. For instance, I can write a naked option (an option to buy a security I don't even own). They're pretty flexible instruments, and I'm not sure how Safes are substantially different. That having been said, it sounds great for founders and funders, since it's far simpler than the alternatives, and I'm shocked no one has thought to do this before. Kudos to the YC folks for having the insight to set it up.
But agreed, kudos to YC :)
Is there indeed a statutory or regulatory requirement to that effect? I'm not an attorney and you are, so you'd know better than me, but it's my understanding that "option" applies broadly to contractual obligations and rights to sell/purchase property or rights at some sort of preordained terms, conditions, price, or whatever.
It's entirely possible that I'm missing a subtlety, and I'll follow the discussion to learn what that is.
In that case of your ISOs, those would be tied to the existing common stock of the company. While the actual shares that you might exercise on aren't yet issued, the class of stock itself exists and the terms are set.