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

The upside 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 alternative premium paid. However, a stock can never ever go listed below no, topping the upside, whereas the long call has in theory unrestricted advantage. Long puts are another simple and popular way to bet on the decline of a stock, and they can be 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 financial investment. {keywords}. A long put is an excellent option when you expect the stock to fall significantly before the option expires ({keywords}). If the stock falls only somewhat listed below the strike price, the option will remain in the money, but might not return the premium paid, handing you a bottom line ({keywords}).

Short put, This strategy is the flipside of the long put, but here the trader offers a put referred to as “going short” a put and expects the stock rate to be above the strike price by expiration – {keywords}. In exchange for offering a put, the trader receives a cash 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 rate of $20 and expiration in four months is trading at $1 ({keywords}). The contract pays a premium of $100, or one contract * $1 * 100 shares represented per agreement. Here’s the profit on the short put at expiration: In this example, the brief put breaks even at $19, or the strike rate 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 upside on the short put is never ever 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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