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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. Below $19 the put increases in value $100 for each dollar decline in the stock. binary options trading. {keywords}.

The upside on a long put is practically as excellent as on a long call, because the gain can be multiples of the option premium paid. A stock can never ever go below absolutely no, capping the advantage, whereas the long call has in theory endless advantage. Long puts are another simple and popular method to wager on the decline of a stock, and they can be much 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 financial investment. {keywords}. A long put is a great option when you expect the stock to fall significantly before the alternative ends ({keywords}). If the stock falls just a little below the strike rate, the alternative will remain in the cash, however may not return the premium paid, handing you a bottom line ({keywords}).

Short put, This technique is the flipside of the long put, however here the trader sells a put referred to as “going short” a put and anticipates the stock price to be above the strike rate by expiration – {keywords}. In exchange for offering a put, the trader receives a money 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 contract. Here’s the profit on the brief put at expiration: In this example, the brief put breaks even at $19, or the strike cost less the premium got.

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

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