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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 rate minus the $1 premium paid. Below $19 the put increases in value $100 for every dollar decline in the stock. trading options. {keywords}.

The advantage on a long put is practically as good as on a long call, since the gain can be multiples of the alternative premium paid. Nevertheless, a stock can never go below no, capping the advantage, whereas the long call has in theory unrestricted upside. Long puts are another easy and popular method 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 price at expiration of the choice, the put expires worthless and you’ll lose your financial investment. {keywords}. A long put is a great option when you expect the stock to fall considerably before the option ends ({keywords}). If the stock falls only somewhat below the strike cost, the choice will be in the money, but might not return the premium paid, handing you a net loss ({keywords}).

Short put, This strategy is the flipside of the long put, but here the trader sells a put described as “going short” a put and expects the stock rate to be above the strike cost by expiration – {keywords}. In exchange for offering 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 cost of $20 and expiration in 4 months is trading at $1 ({keywords}). The agreement pays a premium of $100, or one contract * $1 * 100 shares represented per agreement. Here’s the earnings on the short 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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In between $19 and $20, the put seller would make some but not all of the premium – {keywords}. The advantage on the short put is never more than the premium got, $100 here ({keywords}). Like the brief call or covered call, the maximum return on a brief put is what the seller gets upfront ({keywords}).

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