7.13. Argue how American put buying/selling works. a) How American put buying works. Buyers of a put expect the underlying stock to fall in value. In each of the following cases, what are the feasible actions of a buyer and their outcomes in terms of monetary gain or loss? Case 1: The price of the stock increases after the buyer purchased the put. Case 2: The price of the stock almost does not change. Case 3: The price of the stock decreases and the exercise price of the put is higher than the price of the stock at the expiration date. b) How American put selling works. Under the plan of selling puts, you grant someone else the right to sell 100 shares to you at the exercise price. At the time you sell, you receive a pre- mium. Like the call seller, you do not have much control over the outcome of your investment since the buyer will decide whether to exercise the put you sold him. In each of the following cases, what are the feasible actions of a put seller and their monetary results? Case 1: The price of the stock increases. Case 2: The price of the stock remains stable till the expiration date. Case 3: The price of the stock decreases and the put is in the money at the expiration