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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 alternative expiration at $19 per share, or the strike cost minus the $1 premium paid. Below $19 the put increases in worth $100 for each dollar decrease in the stock. best options trading platform. {keywords}.

The advantage on a long put is almost as good as on a long call, since the gain can be multiples of the choice premium paid. A stock can never go listed below no, topping the benefit, whereas the long call has theoretically unrestricted advantage. Long puts are another easy and popular way to bet on the decline of a stock, and they can be safer than shorting a stock ({keywords}).

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If the stock closes above the strike rate at expiration of the alternative, the put ends useless and you’ll lose your investment. {keywords}. A long put is a good choice when you anticipate the stock to fall significantly before the choice ends ({keywords}). If the stock falls only somewhat below the strike price, the alternative will be in the cash, but might not return the premium paid, handing you a net loss ({keywords}).

Short put, This technique is the flipside of the long put, but here the trader offers a put described as “going short” a put and expects the stock price 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 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 agreement * $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 rate less the premium got.

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

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