.I. Pull-ID QUESTION 2? 1. Suppose you were replicating a two-period put option in a binomial tree. Then, the replicating strategy involves an initial short position in the underlying stock that r. r t'" is held unchanged to maturity. is increased in size [i.e., becomes more short) after one period. is increased in size [i.e., becomes more short) if the price goes down in the rst period and decreased in size (becomes less short) if the price goes up in the rst period. is decreased in size {i.e., becomes less short} if the price goes down in the rst period and increased in size {becomes more short) if the price goes up in the rst period