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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 decline in the stock. options trading for beginners. {keywords}.

The benefit on a long put is almost as good as on a long call, since the gain can be multiples of the option premium paid. Nevertheless, a stock can never ever go listed below no, capping the advantage, whereas the long call has theoretically unrestricted upside. Long puts are another simple and popular method to bet 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 a good option when you anticipate the stock to fall considerably prior to the choice expires ({keywords}). If the stock falls just slightly listed below the strike cost, the choice will be 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 described as “going short” a put and anticipates the stock rate to be above the strike cost 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 cost of $20 and expiration in 4 months is trading at $1 ({keywords}). The contract 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 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 upside on the brief put is never 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 receives in advance ({keywords}).

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