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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 cost minus the $1 premium paid. Listed below $19 the put increases in worth $100 for each dollar decline in the stock. options trading robinhood. {keywords}.

The advantage on a long put is nearly as great as on a long call, because the gain can be multiples of the choice premium paid. However, a stock can never go listed below no, capping the benefit, whereas the long call has theoretically unlimited benefit. Long puts are another easy and popular way to bet 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 rate at expiration of the option, the put ends useless and you’ll lose your financial investment. {keywords}. A long put is a great option when you expect the stock to fall considerably prior to the option ends ({keywords}). If the stock falls only a little below the strike cost, the option will be in the money, but may not return the premium paid, handing you a bottom line ({keywords}).

Short put, This strategy is the flipside of the long put, however here the trader offers a put described as “going short” a put and anticipates the stock price to be above the strike price by expiration – {keywords}. In exchange for offering a put, the trader receives 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 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 earnings on the short put at expiration: In this example, the brief put breaks even at $19, or the strike cost less the premium got.

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In between $19 and $20, the put seller would make some however not all of the premium – {keywords}. The upside on the brief 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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