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

The benefit on a long put is almost as great as on a long call, because the gain can be multiples of the option premium paid. A stock can never go listed below absolutely no, topping the upside, whereas the long call has in theory endless advantage. Long puts are another simple and popular method to wager on the decrease of a stock, and they can be safer than shorting a stock ({keywords}).

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If the stock closes above the strike cost at expiration of the choice, the put ends useless and you’ll lose your investment. {keywords}. A long put is an excellent option when you expect the stock to fall substantially before the choice expires ({keywords}). If the stock falls only slightly listed below the strike rate, the alternative will be in the money, however may not return the premium paid, handing you a net loss ({keywords}).

Short put, This strategy is the flipside of the long put, but here the trader sells a put referred to as “going short” a put and expects the stock cost to be above the strike price by expiration – {keywords}. In exchange for offering a put, the trader gets a cash premium, which is the most a short 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 four months is trading at $1 ({keywords}). The contract pays a premium of $100, or one contract * $1 * 100 shares represented per agreement. Here’s the earnings on the brief put at expiration: In this example, the brief put breaks even at $19, or the strike price less the premium got.

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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 got, $100 here ({keywords}). Like the brief call or covered call, the optimum return on a brief put is what the seller receives upfront ({keywords}).

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