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No. of Recommendations: 4
The only reason I can think of to exercise and hold the stock is if the option is about to expire. Otherwise, I'd just let the options continue to run.

Personally, I don't think holding in order to get some future gains as long term is a great idea. You have to tie up your investment capital just to potentially save a some taxes in a year or two. Maybe - if you would be willing to buy the stock in the open market and hold it. But with the options you get all of the up side potential with none of the down side risk. And with none of your money tied up.

The main reason people exercise and immediately sell is that they want to spend the money OR they want to diversify their investments. Remember - you've already got a significant financial commitment with your employer. Holding your employer's stock only adds to that financial tie to your employer. If your employer's business goes bust, you'll lose both your job and your investment with them at the same time. It's a common suggestion to exercise and sell the stock, then reinvest the proceeds in some other stock or mutual fund.

--Peter
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