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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 alternative expiration at $19 per share, or the strike rate minus the $1 premium paid. Below $19 the put increases in worth $100 for each dollar decrease in the stock. binary options trading. {keywords}.

The benefit on a long put is practically as good as on a long call, since the gain can be multiples of the choice premium paid. However, a stock can never go below absolutely no, topping the advantage, whereas the long call has in theory unlimited upside. Long puts are another simple and popular way to bet on the decrease of a stock, and they can be much safer than shorting a stock ({keywords}).

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If the stock closes above the strike cost at expiration of the alternative, the put expires useless and you’ll lose your investment. {keywords}. A long put is a good choice when you expect the stock to fall substantially before the choice expires ({keywords}). If the stock falls only somewhat below the strike rate, the choice will be in the cash, but may not return the premium paid, handing you a net loss ({keywords}).

Short put, This method is the flipside of the long put, but here the trader sells a put referred to as “going short” a put and anticipates the stock price to be above the strike rate by expiration – {keywords}. In exchange for offering a put, the trader gets a cash premium, which is the most a brief put can make.

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Stock X is trading for $20 per share, and a put with a strike rate of $20 and expiration in four months is trading at $1 ({keywords}). The agreement pays a premium of $100, or one contract * $1 * 100 shares represented per agreement. Here’s the profit 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 earn some however not all of the premium – {keywords}. The upside on the brief put is never more than the premium got, $100 here ({keywords}). Like the brief call or covered call, the maximum return on a brief put is what the seller receives upfront ({keywords}).

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