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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 alternative 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 dollar decline in the stock. options trading robinhood. {keywords}.

The advantage 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. However, a stock can never ever go below no, capping the upside, whereas the long call has in theory endless advantage. Long puts are another simple and popular method to wager 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 price at expiration of the option, the put expires worthless and you’ll lose your investment. {keywords}. A long put is a good choice when you expect the stock to fall significantly before the choice ends ({keywords}). If the stock falls just slightly listed below the strike price, the alternative 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 offers a put described 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 receives 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 contract pays a premium of $100, or one agreement * $1 * 100 shares represented per agreement. Here’s the revenue on the short put at expiration: In this example, the short put breaks even at $19, or the strike price less the premium got.

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In between $19 and $20, the put seller would make 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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