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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 option expiration at $19 per share, or the strike cost minus the $1 premium paid. Listed below $19 the put increases in worth $100 for every single dollar decrease in the stock. best options trading platform. {keywords}.

The benefit on a long put is almost as good as on a long call, since 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 endless advantage. Long puts are another basic and popular method 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 rate at expiration of the option, the put ends useless and you’ll lose your financial investment. {keywords}. A long put is an excellent option when you anticipate the stock to fall considerably prior to the choice expires ({keywords}). If the stock falls only a little below the strike price, 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, but here the trader offers a put referred to as “going short” a put and expects the stock cost to be above the strike price by expiration – {keywords}. In exchange for offering 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 cost 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 cost less the premium received.

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Between $19 and $20, the put seller would earn some but not all of the premium – {keywords}. The upside on the short put is never ever more than the premium received, $100 here ({keywords}). Like the short call or covered call, the optimum return on a short put is what the seller receives upfront ({keywords}).

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