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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 choice expiration at $19 per share, or the strike price minus the $1 premium paid. Listed below $19 the put increases in value $100 for every single dollar decrease in the stock. best options trading platform. {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 choice premium paid. A stock can never go listed below absolutely no, capping the upside, whereas the long call has in theory endless advantage. Long puts are another basic and popular method to bet on the decline 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 alternative, the put expires worthless and you’ll lose your financial investment. {keywords}. A long put is a good option when you expect the stock to fall significantly before the alternative expires ({keywords}). If the stock falls only somewhat below the strike price, the alternative 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 described as “going short” a put and anticipates the stock rate to be above the strike rate by expiration – {keywords}. In exchange for selling a put, the trader gets a money 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 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 price less the premium received.

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Between $19 and $20, the put seller would earn some however not all of the premium – {keywords}. The benefit on the brief put is never more than the premium got, $100 here ({keywords}). Like the short call or covered call, the maximum return on a brief put is what the seller gets upfront ({keywords}).

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