A reliable source has told you Johnson Company's stock price will increase from where it is now at $22.50 at an undetermined point over the coming 5 months. For $310.25 now you could buy a 5-month call option which lets you buy 100 shares at $25/share. Suppose you purchase that option for $310.25 and Johnson's stock price does indeed rise to $45, what would your pre-tax net profit be?
100 shares at $25 leads to outflow of 2500+ ...
The expert examines calculating ore-tax net profits.