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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 alternative expiration at $19 per share, or the strike cost minus the $1 premium paid. Listed below $19 the put increases in worth $100 for each dollar decrease in the stock. what is options trading. {keywords}.

The benefit on a long put is nearly as good as on a long call, since the gain can be multiples of the option premium paid. A stock can never ever go below no, topping the upside, whereas the long call has theoretically unlimited benefit. Long puts are another basic and popular method 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 price at expiration of the alternative, the put expires worthless and you’ll lose your investment. {keywords}. A long put is a good option when you anticipate the stock to fall significantly before the alternative ends ({keywords}). If the stock falls just a little listed 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, but here the trader sells a put described as “going short” a put and expects the stock cost to be above the strike rate by expiration – {keywords}. In exchange for selling a put, the trader gets 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 contract pays a premium of $100, or one agreement * $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 cost less the premium got.

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

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