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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 rate minus the $1 premium paid. Listed below $19 the put increases in worth $100 for every dollar decrease in the stock. binary options trading. {keywords}.

The advantage on a long put is almost as good as on a long call, because the gain can be multiples of the choice premium paid. A stock can never go listed below absolutely no, capping the upside, whereas the long call has theoretically endless upside. Long puts are another simple and popular way to wager 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 price at expiration of the choice, the put expires useless and you’ll lose your investment. {keywords}. A long put is an excellent option when you anticipate the stock to fall significantly before the choice ends ({keywords}). If the stock falls only a little below the strike cost, the option will remain in the cash, but 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 offers a put referred to as “going short” a put and anticipates the stock price to be above the strike rate by expiration – {keywords}. In exchange for offering a put, the trader gets 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 4 months is trading at $1 ({keywords}). The agreement 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 short put breaks even at $19, or the strike rate less the premium got.

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In between $19 and $20, the put seller would make some but not all of the premium – {keywords}. The benefit on the brief put is never more than the premium received, $100 here ({keywords}). Like the brief call or covered call, the maximum return on a brief put is what the seller gets in advance ({keywords}).

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