You bought Cisco Systems at $16. You think it will rebound but are unsure about current market conditions. You can hold the stock. Or for $3.50, you can buy a put option that gives you the right to sell your stock for $15 by Jan. 18, 2003.

HOLD THE STOCK BUY A PUT

COST (100 SHARES) $1,600 $1,950 ($1,600 stock purchase price plus $350 put price)

STOCK GOES TO $25 $900 profit $550 ($900 profit from stock less $350 spent for put)

% GAIN 56.3% 28.2%

STOCK GOES TO $10 $600 loss $450 loss ($1,600 purchase price for the stock, plus $350 price for the put, minus the $1,500 sale price on the stock)

% LOSS 37.5% 23.0%

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