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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. Below $19 the put increases in worth $100 for every dollar decrease in the stock. what are 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 alternative premium paid. However, a stock can never go listed below absolutely no, topping the upside, whereas the long call has in theory limitless benefit. Long puts are another easy and popular method to bet on the decrease 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 alternative, the put expires useless and you’ll lose your investment. {keywords}. A long put is a great option when you expect the stock to fall considerably prior to the option ends ({keywords}). If the stock falls only somewhat listed below the strike price, the option will be in the cash, however may 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 referred to as “going short” a put and expects the stock cost to be above the strike price by expiration – {keywords}. In exchange for selling a put, the trader receives a money 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 cost 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 short 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 earn some but not all of the premium – {keywords}. The upside on the short put is never more than the premium got, $100 here ({keywords}). Like the short call or covered call, the optimum return on a brief put is what the seller gets upfront ({keywords}).

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