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

The advantage on a long put is practically as good as on a long call, since the gain can be multiples of the alternative premium paid. A stock can never go listed below no, topping the upside, whereas the long call has in theory endless benefit. Long puts are another basic and popular method to wager 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 cost at expiration of the option, 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 prior to the alternative expires ({keywords}). If the stock falls just slightly below the strike price, the option will remain in the cash, but might not return the premium paid, handing you a bottom line ({keywords}).

Short put, This strategy is the flipside of the long put, but here the trader offers a put described as “going short” a put and expects the stock cost to be above the strike price by expiration – {keywords}. In exchange for selling a put, the trader receives a cash premium, which is the most a brief put can make.

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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 short put at expiration: In this example, the brief put breaks even at $19, or the strike rate less the premium got.

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In between $19 and $20, the put seller would earn some however not all of the premium – {keywords}. The benefit on the short put is never more than the premium received, $100 here ({keywords}). Like the brief call or covered call, the optimum return on a short put is what the seller receives upfront ({keywords}).

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