Suppose you believe that Johnson Company's stock price is going to increase from its current level of
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Question:
Suppose you believe that Johnson Company's stock price is going to increase from its current level of $22.50 sometime during the next 5 months. For a total of $810 you can buy a 5-month call option giving you the right to buy 300 shares at a price of $27 per share. If you buy this option for $810 and Johnson's stock price is $26 in 5 months from now right before your option expires, would you exercise your call option and what would your pre-tax net profit or loss be.
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