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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. Below $19 the put increases in worth $100 for every dollar decrease in the stock. options trading robinhood. {keywords}.

The advantage on a long put is nearly as good as on a long call, due to the fact that the gain can be multiples of the option premium paid. However, a stock can never go below no, topping the upside, whereas the long call has in theory unlimited benefit. Long puts are another simple and popular way to bet 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 choice, the put expires useless and you’ll lose your financial investment. {keywords}. A long put is a great option when you anticipate the stock to fall considerably prior to the choice ends ({keywords}). If the stock falls just somewhat listed below the strike cost, the alternative will remain in the cash, however may not return the premium paid, handing you a bottom line ({keywords}).

Short put, This technique is the flipside of the long put, however here the trader sells a put referred to as “going short” a put and anticipates the stock cost to be above the strike cost 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 4 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 revenue on the brief 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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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 got, $100 here ({keywords}). Like the brief call or covered call, the optimum return on a short put is what the seller gets in advance ({keywords}).

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