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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 alternative expiration at $19 per share, or the strike rate minus the $1 premium paid. Listed below $19 the put increases in worth $100 for each dollar decline in the stock. robinhood options trading. {keywords}.

The benefit on a long put is almost as great as on a long call, since the gain can be multiples of the option premium paid. A stock can never go below zero, topping the benefit, whereas the long call has in theory endless upside. Long puts are another basic 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 price at expiration of the option, the put expires worthless and you’ll lose your 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 slightly listed below the strike price, the option will be in the cash, but might not return the premium paid, handing you a net loss ({keywords}).

Short put, This method is the flipside of the long put, but here the trader offers a put referred to as “going short” a put and expects the stock cost to be above the strike cost by expiration – {keywords}. In exchange for selling a put, the trader gets a cash premium, which is the most a short 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 earnings on the short put at expiration: In this example, the short put breaks even at $19, or the strike cost less the premium received.

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Between $19 and $20, the put seller would make some but not all of the premium – {keywords}. The benefit on the short put is never ever more than the premium received, $100 here ({keywords}). Like the short call or covered call, the optimum return on a brief put is what the seller gets upfront ({keywords}).

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