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Here’s the earnings 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. binary options trading. {keywords}.

The advantage on a long put is almost as good as on a long call, due to the fact that the gain can be multiples of the alternative premium paid. A stock can never go listed below zero, capping the advantage, whereas the long call has theoretically unlimited upside. Long puts are another simple and popular method to wager 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 ends worthless and you’ll lose your investment. {keywords}. A long put is a good choice when you expect the stock to fall substantially prior to the choice ends ({keywords}). If the stock falls only somewhat listed below the strike rate, the option will be in the money, but may not return the premium paid, handing you a net loss ({keywords}).

Short put, This technique is the flipside of the long put, however here the trader offers a put described as “going short” a put and anticipates the stock rate to be above the strike price by expiration – {keywords}. In exchange for offering a put, the trader receives a money premium, which is the most a brief put can earn.

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Stock X is trading for $20 per share, and a put with a strike price 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 revenue on the short put at expiration: In this example, the brief 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 earn some however not all of the premium – {keywords}. The advantage on the brief put is never ever more than the premium received, $100 here ({keywords}). Like the brief call or covered call, the optimum return on a brief put is what the seller receives upfront ({keywords}).

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