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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 choice expiration at $19 per share, or the strike cost minus the $1 premium paid. Listed below $19 the put increases in value $100 for every dollar decline in the stock. options trading. {keywords}.

The advantage on a long put is nearly as great as on a long call, since the gain can be multiples of the choice premium paid. A stock can never go listed below no, topping the benefit, whereas the long call has theoretically unrestricted benefit. 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 cost at expiration of the choice, the put ends worthless and you’ll lose your financial investment. {keywords}. A long put is a good choice when you expect the stock to fall considerably before the alternative expires ({keywords}). If the stock falls only somewhat listed below the strike cost, the alternative will be in the cash, but may not return the premium paid, handing you a net loss ({keywords}).

Short put, This strategy is the flipside of the long put, however here the trader sells a put described as “going short” a put and anticipates the stock rate to be above the strike price by expiration – {keywords}. In exchange for selling a put, the trader receives 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 rate 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 brief put at expiration: In this example, the short put breaks even at $19, or the strike cost less the premium got.

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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 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 in advance ({keywords}).

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