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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 alternative expiration at $19 per share, or the strike rate minus the $1 premium paid. Below $19 the put increases in worth $100 for every dollar decline in the stock. robinhood options trading. {keywords}.

The benefit on a long put is practically as excellent as on a long call, since the gain can be multiples of the alternative premium paid. Nevertheless, a stock can never go below no, capping the upside, whereas the long call has in theory unlimited benefit. Long puts are another basic and popular way to bet on the decrease 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 rate at expiration of the choice, the put ends useless and you’ll lose your investment. {keywords}. A long put is a good choice when you anticipate the stock to fall substantially prior to the option expires ({keywords}). If the stock falls only slightly listed below the strike price, the choice will remain in the money, but might not return the premium paid, handing you a net loss ({keywords}).

Short put, This technique 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 price to be above the strike cost by expiration – {keywords}. In exchange for offering a put, the trader gets a cash 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 agreement * $1 * 100 shares represented per agreement. Here’s the earnings on the brief put at expiration: In this example, the short put breaks even at $19, or the strike price 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 upside on the brief put is never ever more than the premium got, $100 here ({keywords}). Like the short call or covered call, the maximum return on a brief put is what the seller receives upfront ({keywords}).

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