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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 price minus the $1 premium paid. Below $19 the put increases in value $100 for every dollar decrease in the stock. binary 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 choice premium paid. Nevertheless, a stock can never go below zero, capping the advantage, whereas the long call has in theory unlimited benefit. Long puts are another basic and popular way to bet on the decline of a stock, and they can be much 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 expires useless and you’ll lose your investment. {keywords}. A long put is an excellent option when you anticipate the stock to fall considerably prior to the option expires ({keywords}). If the stock falls only slightly listed below the strike rate, 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, however here the trader offers a put described as “going short” a put and expects 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 short put can earn.

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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 profit on the short put at expiration: In this example, the brief 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 earn 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 optimum return on a short put is what the seller gets upfront ({keywords}).

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