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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 option expiration at $19 per share, or the strike cost minus the $1 premium paid. Below $19 the put increases in value $100 for each dollar decline in the stock. binary options trading. {keywords}.

The upside on a long put is nearly as excellent as on a long call, because the gain can be multiples of the alternative premium paid. A stock can never ever go below absolutely no, capping the upside, whereas the long call has theoretically unlimited benefit. Long puts are another simple and popular way to wager on the decrease 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 option, the put expires worthless and you’ll lose your investment. {keywords}. A long put is an excellent choice when you anticipate the stock to fall substantially prior to the choice expires ({keywords}). If the stock falls only slightly below the strike rate, the option will remain in the cash, but may not return the premium paid, handing you a bottom line ({keywords}).

Short put, This technique is the flipside of the long put, however here the trader sells a put described as “going short” a put and anticipates the stock price to be above the strike rate by expiration – {keywords}. In exchange for selling a put, the trader receives 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 earnings on the short put at expiration: In this example, the short 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 but not all of the premium – {keywords}. The upside on the short put is never more than the premium received, $100 here ({keywords}). Like the short call or covered call, the maximum return on a short put is what the seller gets upfront ({keywords}).

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