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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. Listed below $19 the put increases in value $100 for each dollar decrease in the stock. day trading options. {keywords}.

The advantage on a long put is nearly as good as on a long call, due to the fact that the gain can be multiples of the choice premium paid. A stock can never go below zero, capping the benefit, whereas the long call has theoretically unrestricted benefit. Long puts are another easy and popular way to bet on the decline 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 alternative, the put ends useless and you’ll lose your financial investment. {keywords}. A long put is a great choice when you anticipate the stock to fall considerably before the alternative ends ({keywords}). If the stock falls just a little below the strike price, the option will be in the cash, 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 sells a put referred to as “going short” a put and anticipates the stock price to be above the strike cost by expiration – {keywords}. In exchange for selling a put, the trader gets a money 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 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 contract. Here’s the profit on the brief put at expiration: In this example, the short 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 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 in advance ({keywords}).

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