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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 choice expiration at $19 per share, or the strike cost minus the $1 premium paid. Listed below $19 the put increases in value $100 for each dollar decrease in the stock. options trading robinhood. {keywords}.

The benefit on a long put is almost as excellent as on a long call, due to the fact that the gain can be multiples of the option premium paid. Nevertheless, a stock can never go below no, capping the advantage, whereas the long call has theoretically limitless benefit. Long puts are another easy 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 price at expiration of the option, the put ends worthless and you’ll lose your investment. {keywords}. A long put is a good option when you anticipate the stock to fall considerably prior to the alternative expires ({keywords}). If the stock falls just somewhat listed below the strike rate, the choice will be in the cash, but may not return the premium paid, handing you a bottom line ({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 cost to be above the strike price by expiration – {keywords}. In exchange for selling a put, the trader receives a cash premium, which is the most a short put can earn.

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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 contract pays a premium of $100, or one contract * $1 * 100 shares represented per contract. Here’s the revenue on the brief 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 advantage on the short put is never ever more than the premium received, $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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