Also the other thing that's screwed up about this is you pay taxes when you exercise the options at the normal income tax rate. But when you want to apply the tax deduction in the event of a loss, you're only allowed to do it on 'capital gains' for an unlimited amount and a max of $3000 on normal income. In fact it might be preferable to deduct it against normal income and keep rolling it over and just pay normal capital gains taxes (which is much lower than your income tax rate typically).
Pretty much. I have a $10K capital loss from a bad investment over 10 years ago. I simply keep rolling it forward until I have a capital gain to offset it.