But the security does exist I think; they're just not yet traded on a public/liquid market. I've received ISOs in two different companies that were privately held. Those were definitely options, definitely on securities that existed, and those became publicly valued and liquid only after a purchase by a public company (in one case) and an IPO (in the other).

It's entirely possible that I'm missing a subtlety, and I'll follow the discussion to learn what that is.