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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. Listed below $19 the put increases in value $100 for each dollar decrease in the stock. trading options. {keywords}.

The benefit on a long put is practically as great as on a long call, since the gain can be multiples of the alternative premium paid. However, a stock can never go listed below absolutely no, topping the advantage, whereas the long call has in theory limitless upside. Long puts are another basic and popular method 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 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 expires ({keywords}). If the stock falls only a little listed below the strike cost, the alternative will remain 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, however here the trader offers a put described 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 receives a money premium, which is the most a brief put can earn.

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Stock X is trading for $20 per share, and a put with a strike rate of $20 and expiration in four 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 revenue on the brief put at expiration: In this example, the brief put breaks even at $19, or the strike price less the premium got.

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In between $19 and $20, the put seller would make some however not all of the premium – {keywords}. The benefit 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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