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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 option expiration at $19 per share, or the strike rate minus the $1 premium paid. Below $19 the put increases in value $100 for every single dollar decrease in the stock. 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 choice premium paid. A stock can never ever go listed below zero, topping the upside, whereas the long call has in theory limitless advantage. Long puts are another basic and popular way to bet on the decline of a stock, and they can be more secure than shorting a stock ({keywords}).

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If the stock closes above the strike rate at expiration of the alternative, the put expires worthless and you’ll lose your investment. {keywords}. A long put is a good choice when you anticipate the stock to fall substantially before the choice ends ({keywords}). If the stock falls just a little below the strike rate, the choice will remain in the cash, however may not return the premium paid, handing you a bottom line ({keywords}).

Short put, This method 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 cost by expiration – {keywords}. In exchange for selling 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 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 profit on the brief put at expiration: In this example, the brief put breaks even at $19, or the strike rate less the premium got.

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

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