While the Dow Jones industrial average broke the 13,000-point marker last week, the heat on tech stock prices has been building for months. So far this year, the tech-heavy Nasdaq is up about 5 percent, putting it on a pace for a 20 percent annualized return.

Stock options give workers the right to buy stock at a predetermined price for up to 10 years. Every uptick pushes worthless "underwater" options closer to profitability. Every uptick moves employees closer to cashing out and buying a dream.

"The market goes up, exercises go up," said Mark Clem, a director in Charles Schwab's stock plan services group. "I'd say we're closer to the beginning than the end. There are still a lot of unexercised options out there."

A Mercury News analysis of data disclosed in recent weeks from 10 of Silicon Valley's biggest companies indicates that workers at those companies could have pocketed $6 billion simply by placing a brokerage order as the year began. Assuming they haven't cashed in any options as the market heated up, their profits have climbed to $7 billion.

Despite the carnage of the dot-com bust that started in March 2000, all or nearly all of the options that workers can exercise at some of those companies are in the money. And not just slightly into the money, either. Some 94 percent of the options at the biomedical firm Gilead Sciences could fetch at least a 100 percent gain, beating out search engine giant Google (88 percent) and graphics chip maker Nvidia (82 percent).

Chip maker Intel's largest swath of options - 191 million, according to its annual report - also is bobbing near profitability. Every $1 increase in the stock price above $22.12 will translate into $191 million inpaper profits.

Everyone's cashing in

Not that tech executives haven't noticed. In the past 90 days, corporate executives at Silicon Valley companies have exercised more than 28 million options for $301 million and sold nearly 42 million shares for nearly $1.3 billion.

Anecdotal evidence suggests rank-and-file employees are cashing in, too. For Nvidia engineer Richard Callery, 40, the surging stock market has meant the end to a seven-year wait that forced him to weather a financial squeeze that at times left him wondering how to pay his family's bills.

His original hope of being a millionaire was "outlandish," he said. But as Nvidia's stock rose last year he started thinking, "What would it take to pay off the house? Could I make that happen?"

Financial planners and tax advisers say they're getting more calls from clients - or are contacting them - to re-evaluate their option holdings. Brokerages that handle corporate stock plans also say business is heating up.

Schwab's Clem took the pulse at about a half-dozen companies last week, and each reported that more workers were exercising options. One South Bay tech company, which he declined to identify, said trading is four times higher than the same period last year. The biggest spike came when its stock price hit a "round number" - apparently a psychological milestone for many workers.

Based on how much workers have cashed in each day, they appear to be riding a roller coaster along with the stock market, said Tom Roberts, vice president of corporate services for E-Trade Financial.

Though he wouldn't share statistics for proprietary reasons, he said January was "pretty good," and February was a "barn-burner" until the Shanghai market's panic attack cleaved 4 percent from the Nasdaq and punished 145 of the valley's 150 biggest stocks. The average cash-out fell in half in March, he said, but April's average is up about one-third and is nearly back to January's levels.

Exercising with caution

"People really seem to play this as a momentum play," Roberts said. "If they sense a top ... that's when they start taking money off the table at faster and faster rates."

Their good fortunes will cascade through the economy to car dealers, real estate agents and home sellers, restaurants, remodeling contractors, landscapers - even Gov. Arnold Schwarzenegger as he tries to close California's budget gap.

No one would blame tech workers for doubting this day might come. In the wake of the tech meltdown after the Nasdaq peaked above 5,000 in March 2000, tech stocks plunged and options slipped underwater - putting their market value below their exercise price. Despite the Nasdaq's recent surge, it's still at barely half of its peak level.

But valley companies commonly took steps to keep employees from growing demoralized. Some repriced options as their stock plummeted. Some allowed workers to trade underwater options for a smaller number of lower-priced options. Some granted new options to essentially replace the ones that were never expected to resurface.

And though tech companies have slowed the flow of options in the wake of shareholder pressure and new accounting rules, options continue to be a primary currency in Silicon Valley. Workers still commonly receive options when they sign on and at annual reviews, for instance.

Yet something seems different about workers this time, some experts say. The psychological scars of the last meltdown seem to have made workers more prudent. Experts say anecdotal evidence suggests they're taking money off the table periodically rather than letting their bets ride as they did during the boom. Instead of holding onto stock long enough to qualify for a tax break, they're cashing out quickly. And many appear to be reinvesting their profits in a broader portfolio so they aren't as vulnerable if their company stock or its tech sector skids off course.

Clem attributes some of the trend to cash out to the "spousal effect," alluding to spouses who want to avoid past mistakes, saying, "Not this time, honey."

Bella Berlly, a certified financial planner with GoalPath Financial Planning in Los Altos, thinks the clients who stuck with her through the boom and bust are more realistic this time around. That's partly because they bear the scars of meltdown, she said - once inadvertently referring to her clients as "patients." But it's also because financial millstones like college bills and retirement are looming.

"Whether you call it greed, whether you call it invincibility, there was that kind of sense that there's no way stock prices were going to go anywhere but through the roof," Berlly said of the boom mentality. Today "People are confident, but it's not that blinding confidence."

As E-Trade's Roberts put it: "We see people hitting singles, doubles and home runs. Very few people are waiting for the grand slams."

Callery, the Nvidia software quality assurance engineer, can relate. He witnessed the boom and bust firsthand - and it was painful, stressful and costly.

When he started at Santa Clara-based Nvidia in 2000, he looked at the high-flying stock's arc and dreamed of cashing in millions of dollars. But he couldn't at the time because the company was in a trading "blackout" that barred him from doing so. Meanwhile, Nvidia's stock tumbled during the tech meltdown, then took another hit after the Sept. 11 terrorist attacks in 2001.

It was torture to watch as the stock skidded within 10 months from a high of nearly $36 to a low of less than $4, after adjusting for stock splits.

Waiting it out

"It was brutal," Callery said. "We were literally months away from seeing things happen, then slowly watching it tick down. Then we were watching it over the next couple of years stay stagnant and linger, and the stock was underwater. It puts things into perspective. The pipe dream from before - oh, millions! - then hoping for hundreds. I'm fortunate enough to wait it out."

It wasn't easy financially. Callery cleaned out the glove compartment of his Chrysler because he feared it might get repossessed. He and his wife scoured newspaper ads for grocery coupons. Interest charges mounted as they paid the minimum each month to pay off a Sears sofa. Financial tensions erupted into arguments with his wife.

The bind was so tight that Callery cashed in his first slice of options soon after they vested. The options fetched only a few thousand dollars, but it was a lifeline that cleared the family's bills.

Then came five long years of waiting and stock-watching.

Last November, Callery cashed in three-fourths of his options. He might have pocketed more by waiting, but he's content. He got enough to consider trading up to a bigger house, pay for their eldest daughter to start college in the fall, and put braces on their younger daughter and son. He also still has a chunk of options he could cash in for a new car - he wants a "midlife crisis" Mustang but jokes that he might scale back to a cheaper Nissan to pad their college savings fund. Plus he has accumulated additional options awarded him over the years.

"My options here at Nvidia have turned our lives around," Callery said. "That would not be possible without the market being where it is and the grace of God."

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