If the stock were to trade down in an area between $80.00 and
$82.00 by January 2004 expiration, you would be able to sell the
stock for its exact price at that time. You would lose a little
money from the amount you paid for the collar and you would also
lose a little money from $82.00 down to wherever the stock
closed on expiration day in January 2004.

If the stock were to trade down below $80.00, you would be
guaranteed a sales price of $80.00 because you own the 80 strike
put. No matter how much lower the stock went, you would be
guaranteed $80.00. Of course, you would have to deduct the cost
of the collar from the sales price, but that should be minimal.
If the stock were to remain stagnant, you would be able to sell
the stock at the closing price, on expiration day of January
2004. Your only cost would only be the amount of money you paid
for the collar.

If the stock were to trade up to a price between $82.00 and
$85.00, you would be able to sell your stock at whatever price
the stock closes at the January expiration date.

Again, you will have to deduct the amount of money you spent for
your collar but the increase in price would offset this expense.

Finally, if the stock trades up and closes above $85.00 on
expiration day of January 2004, your stock will be called away
from you at $85.00 due to you being short the $85.00 strike
call. So in this scenario your upside is limited, but at least
you have locked in some additional gains, and avoided the higher
short term capital gains taxes.

As you can see, the collar will give you a range of protection
that assures a sales price that is very acceptable, with minimal
risk and room for some further upside appreciation. This also
buys you the necessary time you need to get past that one year
mark and enable you to avoid the higher, long-term capital gains
tax. You would now only have to pay the lower, long term capital
gains tax, which would save you money.

In conclusion, the two tax deferral strategies outlined above
are both excellent ways to save you up to 67% on your annual tax
liability from your medium to long term stocks. Again, you would
use these strategies on stocks that you have owned close to one
year, and for which you would like to lock in the current sale
price without actually selling the stock.

In this scenario, a properly initiated options strategy can save
you a considerable amount of money on your taxes.

Again however, please consult your broker, tax attorney, or
accountant to make sure that these strategies are still
acceptable to the IRS. Tax laws do change, and it is your
responsibility to be aware of new laws.