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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 price minus the $1 premium paid. Below $19 the put increases in value $100 for every single dollar decrease in the stock. robinhood options trading. {keywords}.

The upside on a long put is practically as great as on a long call, because the gain can be multiples of the option premium paid. A stock can never go below absolutely no, topping the upside, whereas the long call has theoretically unlimited benefit. Long puts are another simple and popular method to wager 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 cost at expiration of the alternative, the put expires worthless and you’ll lose your financial investment. {keywords}. A long put is a great option when you anticipate the stock to fall substantially before the alternative ends ({keywords}). If the stock falls just somewhat listed below the strike rate, the alternative will remain in the cash, but might not return the premium paid, handing you a bottom line ({keywords}).

Short put, This method is the flipside of the long put, but 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 selling a put, the trader receives a cash premium, which is the most a brief 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 agreement pays a premium of $100, or one agreement * $1 * 100 shares represented per agreement. Here’s the earnings on the short 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 upside on the short put is never more than the premium received, $100 here ({keywords}). Like the short call or covered call, the maximum return on a short put is what the seller gets in advance ({keywords}).

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