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Here’s the profit 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 dollar decrease in the stock. binary options trading. {keywords}.

The advantage 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 go below absolutely no, capping the advantage, whereas the long call has in theory unrestricted benefit. Long puts are another simple and popular method to bet on the decline 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 option, the put ends useless and you’ll lose your investment. {keywords}. A long put is a great choice when you expect the stock to fall substantially prior to the alternative expires ({keywords}). If the stock falls just a little listed below the strike cost, the choice will be in the cash, but might not return the premium paid, handing you a net loss ({keywords}).

Short put, This method is the flipside of the long put, however here the trader offers a put described as “going short” a put and expects the stock price to be above the strike rate 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 rate 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 contract. Here’s the earnings 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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In 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 received, $100 here ({keywords}). Like the short call or covered call, the optimum return on a short put is what the seller receives in advance ({keywords}).

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