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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 value $100 for every dollar decrease in the stock. binary options trading. {keywords}.

The advantage on a long put is nearly as great as on a long call, because the gain can be multiples of the alternative premium paid. A stock can never ever go below absolutely no, topping the upside, whereas the long call has theoretically unrestricted benefit. Long puts are another easy and popular method to wager 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 cost at expiration of the choice, the put ends useless and you’ll lose your investment. {keywords}. A long put is an excellent choice when you anticipate the stock to fall considerably before the option expires ({keywords}). If the stock falls just somewhat listed below the strike cost, the alternative will be in the cash, but may not return the premium paid, handing you a bottom line ({keywords}).

Short put, This method is the flipside of the long put, but here the trader sells a put referred to as “going short” a put and anticipates the stock cost to be above the strike rate by expiration – {keywords}. In exchange for selling a put, the trader gets a money 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 cost of $20 and expiration in 4 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 revenue 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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Between $19 and $20, the put seller would earn some but not all of the premium – {keywords}. The advantage on the brief put is never more than the premium received, $100 here ({keywords}). Like the brief call or covered call, the optimum return on a short put is what the seller receives upfront ({keywords}).

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