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

The advantage on a long put is almost as great as on a long call, since the gain can be multiples of the choice premium paid. A stock can never go listed below absolutely no, capping the benefit, whereas the long call has theoretically limitless benefit. 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 choice, the put expires worthless and you’ll lose your financial investment. {keywords}. A long put is a good option when you anticipate the stock to fall substantially before the alternative expires ({keywords}). If the stock falls only somewhat listed below the strike price, the alternative will remain in the money, but may not return the premium paid, handing you a bottom line ({keywords}).

Short put, This method is the flipside of the long put, but here the trader offers a put described as “going short” a put and expects the stock price to be above the strike price by expiration – {keywords}. In exchange for selling a put, the trader receives a money 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 cost 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 revenue on the short put at expiration: In this example, the brief put breaks even at $19, or the strike price less the premium received.

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In between $19 and $20, the put seller would earn some however not all of the premium – {keywords}. The advantage on the brief put is never 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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