Problem: Suppose a stock is priced at $30 and an eight month call on the stock with an exercise price of $25 is priced at $6.00. Compute the taxable gain for each of the following cases. Assume 100 call contracts.
a) You buy the call. Four months later, the stock is at $28 and the call is at $4.50. You then sell the call.
B) You buy the call. Four months later the stock is at $31 and the call is at $6.50. You then sell the call.
c) you buy the call. At expiration the stock is at $32. You exercise the call and sell the stock a month later for $35.00.
d) You buy the stock and write the call. You hold the postiton until expiration whereupon the stock is $28.