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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 choice expiration at $19 per share, or the strike cost minus the $1 premium paid. Below $19 the put increases in worth $100 for every dollar decline in the stock. best options trading platform. {keywords}.

The advantage on a long put is practically as great as on a long call, since the gain can be multiples of the alternative premium paid. A stock can never go below no, topping the advantage, whereas the long call has in theory unlimited upside. Long puts are another basic and popular method to bet 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 price at expiration of the alternative, the put ends useless and you’ll lose your investment. {keywords}. A long put is a good choice when you expect the stock to fall considerably before the choice ends ({keywords}). If the stock falls only a little below the strike price, the choice will remain in the cash, but might not return the premium paid, handing you a net loss ({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 price to be above the strike rate by expiration – {keywords}. In exchange for offering a put, the trader receives 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 contract pays a premium of $100, or one agreement * $1 * 100 shares represented per contract. Here’s the revenue on the short put at expiration: In this example, the short put breaks even at $19, or the strike rate less the premium got.

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In 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 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 receives upfront ({keywords}).

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