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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 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 single dollar decline in the stock. binary options trading. {keywords}.

The upside on a long put is practically as great as on a long call, because the gain can be multiples of the option premium paid. However, a stock can never ever go below no, topping the upside, whereas the long call has theoretically limitless benefit. Long puts are another basic 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 ends worthless and you’ll lose your investment. {keywords}. A long put is an excellent choice when you expect the stock to fall considerably before the option ends ({keywords}). If the stock falls just a little below the strike rate, the option will be in the cash, but might 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 offers a put described as “going short” a put and anticipates the stock price to be above the strike price by expiration – {keywords}. In exchange for selling a put, the trader receives a cash premium, which is the most a brief 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 agreement pays a premium of $100, or one contract * $1 * 100 shares represented per agreement. Here’s the revenue on the short put at expiration: In this example, the brief put breaks even at $19, or the strike price less the premium got.

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

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