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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. Below $19 the put increases in value $100 for each dollar decline in the stock. options trading. {keywords}.

The upside on a long put is nearly as excellent as on a long call, since the gain can be multiples of the alternative premium paid. A stock can never go listed below zero, capping the upside, whereas the long call has in theory limitless upside. Long puts are another simple and popular way to wager on the decrease 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 choice, the put ends useless and you’ll lose your investment. {keywords}. A long put is an excellent choice when you anticipate the stock to fall significantly before the option ends ({keywords}). If the stock falls only somewhat below the strike price, the alternative will remain in the cash, however may not return the premium paid, handing you a bottom line ({keywords}).

Short put, This strategy is the flipside of the long put, however here the trader offers a put described as “going short” a put and expects the stock rate to be above the strike price 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 rate of $20 and expiration in 4 months is trading at $1 ({keywords}). The contract pays a premium of $100, or one agreement * $1 * 100 shares represented per agreement. Here’s the revenue 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 brief call or covered call, the maximum return on a brief put is what the seller receives upfront ({keywords}).

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