Rodrigo wants to add 300 shares of Centerpoint Energy common stock to his portfolio this year. He could buy the stock today. However, he is concerned about the risk that the stock might fall in price in the near future. At the same time, he would like to benefit from any gains should the price rise. Thus, he plans to implement the strategy using call options to protect against downside risk for a future purchase. (Hint: see Section C in Lecture 7A.)

Rodrigo plans to delay the purchase of Centerpoint Energy stock for 2 months.

Here is the market information when Rodrigo implements his strategy.

• Currently, the spot price of Centerpoint Energy common stock is $25 per share.
• A call option on Centerpoint Energy common stock has 100 shares as the underlying asset.
• For call options with a strike price of $25 that expire on the future date when he plans to buy the stock, the premium currently is $1.87 per share.
• The continuously compounded, annualized risk free rate for this scenario is 2.37%.

Now jump ahead in time to the date when Rodrigo buys the Centerpoint Energy common stock and when the call option expires. Suppose that the price of Centerpoint Energy common stock is $17.84. What is Rodrigos total profit or loss on his strategy?

NOTE: apply the exact formula or calculation. Do not approximate by treating the risk-free rate as zero.