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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 option expiration at $19 per share, or the strike rate minus the $1 premium paid. Below $19 the put increases in worth $100 for every dollar decline in the stock. best options trading platform. {keywords}.

The upside on a long put is nearly as great as on a long call, since the gain can be multiples of the option premium paid. However, a stock can never ever go below zero, topping the upside, whereas the long call has theoretically limitless upside. Long puts are another easy and popular way to bet 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 price at expiration of the option, the put ends worthless and you’ll lose your investment. {keywords}. A long put is an excellent option when you anticipate the stock to fall considerably prior to the choice ends ({keywords}). If the stock falls only a little below the strike price, the alternative will remain in the cash, but may not return the premium paid, handing you a net loss ({keywords}).

Short put, This technique is the flipside of the long put, however here the trader offers a put referred to 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 gets 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 contract pays a premium of $100, or one contract * $1 * 100 shares represented per agreement. Here’s the earnings on the brief 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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In between $19 and $20, the put seller would earn some however not all of the premium – {keywords}. The benefit on the brief put is never ever more than the premium got, $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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