If I have a stock is currently at $S_0$=$200, strike price 205 and risk free rate 0.02
The true value of this european call option I determined to be $11.8 per share (For the right to buy up to 1000 shares) expires in 1 year
If the call is misvalued and instead I buy the call option for $10 per share (for the right to buy up to 1000 shares) expires in 1 year
How would I calculate the abitrage profit from a combination of buying the $10 European call option and short selling X number of shares at t=0 and the coming out with a profit at expiry no matter what happens.
portfolio at time 0 =Call Option$_0$-X$S_0$
Any guidance would be greatly appreciated. Thank you