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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 choice expiration at $19 per share, or the strike cost minus the $1 premium paid. Below $19 the put increases in value $100 for each dollar decline in the stock. binary options trading. {keywords}.

The benefit on a long put is nearly as great as on a long call, since the gain can be multiples of the alternative premium paid. A stock can never ever go listed below zero, topping the advantage, whereas the long call has in theory limitless advantage. Long puts are another basic and popular method 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 option, 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 significantly prior to the option ends ({keywords}). If the stock falls just somewhat below the strike price, the alternative will be in the cash, however may 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 described as “going short” a put and anticipates the stock cost 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 short put can make.

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Stock X is trading for $20 per share, and a put with a strike price 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 profit on the short put at expiration: In this example, the brief put breaks even at $19, or the strike price 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 benefit on the brief put is never ever more than the premium got, $100 here ({keywords}). Like the brief call or covered call, the optimum return on a short put is what the seller receives in advance ({keywords}).

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