A straddle is a portfolio with long positions in a European call and put with the same strike price, maturity, and underlying. The straddle is seen to benefit from a movement in either direction away...

A straddle is a portfolio with long positions in a European call and put with the same strike price, maturity, and underlying. The straddle is seen to benefit from a movement in either direction away from the strike price. Show that the payoff of a straddle is |ST − K| and construct the payoff diagram.