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

The upside on a long put is almost as good as on a long call, since the gain can be multiples of the alternative premium paid. However, a stock can never go below absolutely no, topping the upside, whereas the long call has in theory unrestricted benefit. Long puts are another basic and popular method 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 cost at expiration of the alternative, the put ends worthless and you’ll lose your financial investment. {keywords}. A long put is a good option when you expect the stock to fall considerably before the option expires ({keywords}). If the stock falls just slightly listed below the strike cost, the option will remain in the cash, but may 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 referred to as “going short” a put and anticipates the stock rate to be above the strike price by expiration – {keywords}. In exchange for offering a put, the trader gets a cash 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 contract * $1 * 100 shares represented per contract. Here’s the earnings on the brief 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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Between $19 and $20, the put seller would make some however not all of the premium – {keywords}. The advantage on the short put is never more than the premium received, $100 here ({keywords}). Like the brief call or covered call, the maximum return on a brief put is what the seller receives in advance ({keywords}).

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