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Here’s the revenue on the long put at expiration: In this example, the put breaks even when the stock closes at option expiration at $19 per share, or the strike rate minus the $1 premium paid. Below $19 the put increases in worth $100 for every dollar decrease in the stock. options trading robinhood. {keywords}.

The benefit on a long put is nearly as great as on a long call, since the gain can be multiples of the alternative premium paid. A stock can never go below no, capping the upside, whereas the long call has in theory unlimited benefit. Long puts are another simple and popular way to wager on the decline of a stock, and they can be more secure than shorting a stock ({keywords}).

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If the stock closes above the strike rate at expiration of the option, the put expires useless and you’ll lose your investment. {keywords}. A long put is an excellent option when you expect the stock to fall significantly before the choice ends ({keywords}). If the stock falls just slightly below the strike price, the choice will remain in the cash, but may not return the premium paid, handing you a bottom line ({keywords}).

Short put, This method is the flipside of the long put, however here the trader offers a put referred to as “going short” a put and expects the stock rate to be above the strike price by expiration – {keywords}. In exchange for offering a put, the trader gets a money premium, which is the most a brief put can make.

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Stock X is trading for $20 per share, and a put with a strike rate of $20 and expiration in 4 months is trading at $1 ({keywords}). The agreement pays a premium of $100, or one contract * $1 * 100 shares represented per contract. Here’s the revenue on the short put at expiration: In this example, the brief put breaks even at $19, or the strike rate less the premium got.

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In between $19 and $20, the put seller would earn some but not all of the premium – {keywords}. The benefit on the short put is never more than the premium received, $100 here ({keywords}). Like the short call or covered call, the maximum return on a short put is what the seller receives in advance ({keywords}).

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