To follow on to dshoemaker's excellent response.

ESOPs are definitely a lottery ticket based on the value of an upcoming liquidity event. There is a very small, though not entirely absent, market for shares in private companies. The chance of selling your options before a liquidity event is low, so probably best to think about what happens when your company IPOs or is bought by a public company.

The company has a current valuation based on the number of shares authorized, the number of shares issued and the number of dollars invested in the company. For example, if someone invested $10M in the company in an A round in exchange for 1M shares and there were a total of 10M shares authorized, then the company would have a post-money valuation of $100M.

Later on, if your company goes through a second round, like someone buys 1M shares for $20M, then suddenly the company has a post-money valuation of $200M.

Unless the board authorizes and/or issues more shares. If your company was worth $200M after the second round and the board doubles the number of shares in the company, then you're back down to $100M total market cap.

Hopefully your company isn't doing that too often 'cause it often makes previous investors angry when they had an investment worth $10M and suddenly it's worth $5M.

There's also the issue of post-IPO lockouts, where you're not allowed to trade in shares (and most likely exercise options) for 30, 90 or 180 days after an IPO or acquisition. And there's also the issue of taxes. In order to get preferential tax treatment, you have to own securities for a year. It may be difficult on your budget to buy $30,000 worth of stock and hold it for a year if you're only on a $60,000 annual salary.

But... the simple answer is the value of the option is the number of shares in the option grant divided by the total shares issued multiplied by the increase in the per share value between the day you exercise the option and the "strike price" of the share on the day specified in the option grant.

It is an unfortunate characteristic of sili valley firms that they are loathe to reveal the total number of outstanding shares or the per share valuation before an IPO (thought there are reasons they don't want to do this. It's not just them being jerks.)

It is often hard to get sufficient information to make a rational decision about valuing options. Ask your potential employer what the outstanding number of shares and the valuation of the company are. They'll probably say it's their policy to not reveal such details, but it can't hurt to ask. If it does hurt to ask, they're probably a scam company and you didn't want to work there anyway.

After years in the valley, my ISOs were never extremely lucrative. Two thirds of my ISOs were eventually valueless due to share dilution or the company tanking. The remainder were definitely not "life changing money." I was lucky enough to be a founding member of several companies. In those cases I got "founders shares" in exchange for a financial and labor investment in the company. They turned out to be considerably more lucrative than any ISOs I received.

Most importantly, your mileage may vary. There's a common conception that 90% of startups fail. I don't know what the real numbers are, but I'm sure they're pretty high. You may be working for a company in that 10%. Or maybe not.