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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 price minus the $1 premium paid. Below $19 the put increases in value $100 for each dollar decrease in the stock. options trading robinhood. {keywords}.

The advantage on a long put is practically as excellent as on a long call, because the gain can be multiples of the choice premium paid. However, a stock can never go listed below zero, topping the upside, whereas the long call has theoretically limitless benefit. 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 useless and you’ll lose your investment. {keywords}. A long put is a great option when you expect the stock to fall considerably before the alternative expires ({keywords}). If the stock falls only somewhat listed below the strike price, the option will be 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 anticipates the stock price 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 price 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 contract. Here’s the revenue on the short put at expiration: In this example, the brief put breaks even at $19, or the strike price less the premium received.

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Between $19 and $20, the put seller would earn some however not all of the premium – {keywords}. The benefit on the brief 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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