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I read the following on another board and am trying to determine if it is true and (when taking AMT into consideration) is it a good strategy.

Let's say for example I have the option(ISO) to buy 1000 shares @ $20. Current price is $40. Rather than laying out 20 grand, I purchase 10 options for a total of $200. I wait a year and a day and tender those 10 shares for (assuming the price is still @40) 20 shares. I now own 20 shares and still have 970 options. I continue this year after year until I am left with no more options and lets say 600 shares. A year later the stock is trading at $100 and I sell all 600 shares.

Can you tender shares to buy options?
Was my cost basis $200? - would I be taxed 20% on the gain ($60,000 - $200)
Would I have to pay tax when tendering? - AMT, income tax, and/or capital gains?
Would AMT make this more of a hassle than it is worth?

Please help


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