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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 cost minus the $1 premium paid. Below $19 the put increases in value $100 for every single dollar decrease in the stock. day trading options. {keywords}.

The upside on a long put is almost as good as on a long call, due to the fact that the gain can be multiples of the choice premium paid. A stock can never go below no, capping the benefit, whereas the long call has theoretically unrestricted advantage. Long puts are another basic 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 cost at expiration of the choice, the put ends useless and you’ll lose your financial investment. {keywords}. A long put is a great choice when you expect the stock to fall significantly before the option expires ({keywords}). If the stock falls only somewhat below the strike rate, the option will remain in the cash, but might not return the premium paid, handing you a net loss ({keywords}).

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

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Options Trading For Beginners By Benjamin Barret, Paperback ...Options Trading For Beginners By Benjamin Barret, Paperback …

Stock X is trading for $20 per share, and a put with a strike cost of $20 and expiration in 4 months is trading at $1 ({keywords}). The agreement pays a premium of $100, or one agreement * $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 rate less the premium received.

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

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