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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 price minus the $1 premium paid. Listed below $19 the put increases in worth $100 for each dollar decrease in the stock. options trading. {keywords}.

The benefit on a long put is nearly as good as on a long call, because the gain can be multiples of the choice premium paid. A stock can never go below zero, capping the upside, whereas the long call has in theory unrestricted benefit. Long puts are another basic and popular way to bet on the decrease 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 option, the put expires worthless and you’ll lose your investment. {keywords}. A long put is a good option when you expect the stock to fall significantly prior to the option ends ({keywords}). If the stock falls just somewhat below the strike rate, the choice will be in the money, however might 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 offers a put referred to as “going short” a put and anticipates the stock rate to be above the strike rate by expiration – {keywords}. In exchange for offering a put, the trader gets 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 price 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 revenue on the brief put at expiration: In this example, the short put breaks even at $19, or the strike rate less the premium received.

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Between $19 and $20, the put seller would make some but not all of the premium – {keywords}. The benefit on the brief put is never more than the premium got, $100 here ({keywords}). Like the short call or covered call, the maximum return on a short put is what the seller gets upfront ({keywords}).

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