You like the near term prospect of ABC Company and decide to buy the stock call options.The current stock price is $53.You will buy 10 contracts with $54 strike price and it expires in nine months.The call premium for each share is $1.

6 months later, the stock price increases to $56,

Questions:

a)What's the breakeven stock price for the call option?

b)What's the option intrinsic value?

c)What's the option's payoff?

D)Draw an option pay-off diagram;