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5 Options Trading Strategies For Beginners – Bankrate.com

Here’s the earnings 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 price minus the $1 premium paid. Below $19 the put increases in value $100 for each dollar decrease in the stock. best options trading platform. {keywords}.

The advantage on a long put is almost as good as on a long call, because the gain can be multiples of the choice premium paid. A stock can never ever go below zero, capping the benefit, whereas the long call has in theory unrestricted advantage. Long puts are another simple and popular way to bet on the decrease 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 cost at expiration of the option, the put expires useless and you’ll lose your financial investment. {keywords}. A long put is an excellent choice when you expect the stock to fall considerably prior to the choice expires ({keywords}). If the stock falls only somewhat below the strike rate, the option will remain in the money, but may not return the premium paid, handing you a bottom line ({keywords}).

Short put, This technique is the flipside of the long put, but here the trader sells 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 offering 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 price 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 profit on the brief put at expiration: In this example, the brief put breaks even at $19, or the strike rate less the premium received.

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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 ever more than the premium received, $100 here ({keywords}). Like the brief call or covered call, the optimum return on a brief put is what the seller receives upfront ({keywords}).

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