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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 decline in the stock. binary options trading. {keywords}.

The benefit on a long put is nearly as great as on a long call, because the gain can be multiples of the choice premium paid. A stock can never go below no, topping the benefit, whereas the long call has theoretically limitless upside. Long puts are another basic and popular method to bet on the decrease 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 rate at expiration of the choice, the put expires worthless and you’ll lose your investment. {keywords}. A long put is a good option when you anticipate the stock to fall considerably before the option ends ({keywords}). If the stock falls just a little listed below the strike price, the option will remain in the cash, however 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 sells a put described as “going short” a put and anticipates the stock cost to be above the strike price by expiration – {keywords}. In exchange for selling a put, the trader gets a cash premium, which is the most a short put can make.

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Stock X is trading for $20 per share, and a put with a strike price of $20 and expiration in four months is trading at $1 ({keywords}). The contract pays a premium of $100, or one contract * $1 * 100 shares represented per contract. Here’s the earnings on the short put at expiration: In this example, the brief 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 benefit on the short put is never more than the premium received, $100 here ({keywords}). Like the brief call or covered call, the maximum return on a short put is what the seller receives in advance ({keywords}).

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