Table: Selling Calls

You bought Cisco Systems at $16 and believe the stock has some--but not much--upside potential over the next 14 months. You can sit tight and hold the stock. Or you can sell a LEAPs call option that allows another investor to buy your stock for $15 by Jan. 18, 2003. That will net you $5.

HOLD THE STOCK SELL A CALL

COST (100 SHARES) $1,600 $1,100 ($1,600 stock purchase offset by $500 premium)

STOCK GOES TO $25 $900 profit $400 profit ($500 premium minus $100 loss when you sell the stock for $15)

% GAIN 56.3% 36.4%

STOCK GOES TO $10 $600 loss $100 loss ($600 loss is mostly offset by $500 premium)

% LOSS 37.5% 9.1%

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