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

The advantage on a long put is nearly as good as on a long call, because the gain can be multiples of the alternative premium paid. Nevertheless, a stock can never go listed below no, topping the upside, whereas the long call has in theory unlimited upside. Long puts are another simple and popular way to bet on the decrease 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 price at expiration of the option, the put expires worthless and you’ll lose your investment. {keywords}. A long put is a good option when you anticipate the stock to fall considerably before the alternative expires ({keywords}). If the stock falls only slightly below the strike cost, the option will be in the cash, but may not return the premium paid, handing you a net loss ({keywords}).

Short put, This strategy 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 selling a put, the trader receives a money premium, which is the most a brief put can earn.

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Stock X is trading for $20 per share, and a put with a strike cost of $20 and expiration in four months is trading at $1 ({keywords}). The contract 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 short put breaks even at $19, or the strike cost less the premium received.

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

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