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

The benefit on a long put is nearly as great as on a long call, due to the fact that the gain can be multiples of the option premium paid. Nevertheless, a stock can never go below absolutely no, capping the benefit, whereas the long call has theoretically limitless advantage. Long puts are another easy and popular way to wager 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 rate at expiration of the choice, the put ends useless and you’ll lose your investment. {keywords}. A long put is a great option when you anticipate the stock to fall considerably before the choice ends ({keywords}). If the stock falls just a little below the strike rate, the option will be 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 sells a put referred to as “going short” a put and expects the stock price to be above the strike cost by expiration – {keywords}. In exchange for offering a put, the trader gets a money 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 revenue on the short put at expiration: In this example, the brief put breaks even at $19, or the strike price less the premium got.

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

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