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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 cost minus the $1 premium paid. Below $19 the put increases in value $100 for every dollar decline in the stock. options trading for beginners. {keywords}.

The advantage on a long put is nearly as good as on a long call, since the gain can be multiples of the alternative premium paid. A stock can never go listed below no, capping the benefit, whereas the long call has theoretically limitless benefit. Long puts are another simple and popular method to wager on the decline 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 alternative, the put ends worthless and you’ll lose your financial investment. {keywords}. A long put is an excellent choice when you anticipate the stock to fall significantly before the option ends ({keywords}). If the stock falls just somewhat below the strike price, the option will remain in the cash, but might 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 offers a put referred to as “going short” a put and anticipates the stock rate to be above the strike rate by expiration – {keywords}. In exchange for offering a put, the trader receives 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 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 brief put breaks even at $19, or the strike rate less the premium got.

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Between $19 and $20, the put seller would make some however not all of the premium – {keywords}. The benefit on the short put is never 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 in advance ({keywords}).

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