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Here’s the profit 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 price minus the $1 premium paid. Below $19 the put increases in value $100 for every single dollar decrease in the stock. best options trading platform. {keywords}.

The benefit on a long put is almost as excellent as on a long call, because the gain can be multiples of the choice premium paid. A stock can never go listed below no, capping the benefit, whereas the long call has theoretically unrestricted advantage. Long puts are another easy and popular method to wager on the decrease of a stock, and they can be safer than shorting a stock ({keywords}).

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If the stock closes above the strike price at expiration of the choice, the put ends useless and you’ll lose your investment. {keywords}. A long put is an excellent option when you expect the stock to fall substantially prior to the alternative ends ({keywords}). If the stock falls just somewhat below the strike cost, the option will remain in the cash, but may not return the premium paid, handing you a net loss ({keywords}).

Short put, This technique is the flipside of the long put, however here the trader offers a put referred to as “going short” a put and expects the stock cost to be above the strike rate by expiration – {keywords}. In exchange for selling 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 rate of $20 and expiration in four months is trading at $1 ({keywords}). The agreement pays a premium of $100, or one agreement * $1 * 100 shares represented per agreement. Here’s the profit on the short put at expiration: In this example, the short put breaks even at $19, or the strike cost less the premium received.

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In between $19 and $20, the put seller would make some however not all of the premium – {keywords}. The advantage on the brief put is never more than the premium received, $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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