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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. Below $19 the put increases in worth $100 for every single dollar decrease in the stock. options trading. {keywords}.

The advantage on a long put is almost as great as on a long call, since the gain can be multiples of the option premium paid. A stock can never go below no, topping the advantage, whereas the long call has in theory unrestricted upside. Long puts are another easy and popular way to wager on the decrease of a stock, and they can be more secure than shorting a stock ({keywords}).

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If the stock closes above the strike price at expiration of the option, the put expires worthless and you’ll lose your investment. {keywords}. A long put is an excellent choice when you expect the stock to fall considerably before the option ends ({keywords}). If the stock falls only slightly below the strike cost, the alternative will be in the cash, but might not return the premium paid, handing you a bottom line ({keywords}).

Short put, This technique is the flipside of the long put, but here the trader offers a put referred to as “going short” a put and expects the stock rate to be above the strike cost by expiration – {keywords}. In exchange for offering a put, the trader gets a cash premium, which is the most a short 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 4 months is trading at $1 ({keywords}). The agreement pays a premium of $100, or one agreement * $1 * 100 shares represented per contract. Here’s the earnings on the short 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 earn some however not all of the premium – {keywords}. The advantage on the brief put is never ever more than the premium got, $100 here ({keywords}). Like the short call or covered call, the optimum return on a brief put is what the seller gets upfront ({keywords}).

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