108 Part II: Call Option Strategies 
reluctant to sell a call at 2 that he had previously bought for 1 point, because "I've 
only made a point." The similarity is clear - both cases resulted in approximately a 
100% profit - and the investor should be as willing to accept the one as he is the 
other. This is not to imply that all calls that are bought at 1 should be sold when and 
if they get to 2, but the same factors that induce one to sell the 10-point call after 
doubling his money should apply to the 2-point call as well. 
In fact, taking partial profits after a call holding has increased in value is often 
a wise plan. For example, if someone bought a number of calls at a price of 3, and 
they later were worth 5, it might behoove the call holder to sell one-third to one-half 
of his position at 5, thereby taking a partial profit. Having done that, it is often easi­
er to let the profits run on the balance, and letting profits run is generally one of the 
keys to successful trading. 
It is rarely to the call buyer's benefit to exercise the call if he has to pay com­
missions. When one exercises a call, he pays a stock commission to buy the stock at 
the striking price. Then when the stock is sold, a stock sale commission must also be 
paid. Since option commissions are much smaller, dollarwise, than stock commis­
sions, the call holder will usually realize more net dollars by selling the call in the 
option market than by exercising it. 
LOCKING IN PROFITS 
When the call buyer is fortunate enough to see the underlying stock advance rela­
tively quickly, he can implement a number of strategies to enhance his position. 
These strategies are often useful to the call buyer who has an unrealized profit but is 
torn between taking the profit or holding on in an attempt to generate more profits 
if the underlying stock should continue to rise. 
Example: A call buyer bought an XYZ October 50 call for 3 points when the stock 
was at 48. Then the stock rises to 58. The buyer might consider selling his October 
50 (which would probably be worth about 9 points) or possibly taking one of several 
actions, some of which might involve the October 60 call, which may be selling for 3 
points. Table 3-1 summarizes the situation. At this point, the call buyer might take 
one of four basic actions: 
1. Liquidate the position by selling the long call for a profit. 
2. Sell the October 50 that he is currently long and use part of the proceeds to pur­
chase October 60's. 
3. Create a spread by selling the October 60 call against his long October 50. 
4. Do nothing and remain long the October 50 call.