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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 option expiration at $19 per share, or the strike price minus the $1 premium paid. Listed below $19 the put increases in value $100 for each dollar decrease in the stock. best options trading platform. {keywords}.

The advantage on a long put is nearly as great as on a long call, because the gain can be multiples of the alternative premium paid. A stock can never ever go below absolutely no, capping the benefit, whereas the long call has theoretically unlimited advantage. Long puts are another simple and popular way to wager 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 rate at expiration of the choice, the put ends worthless and you’ll lose your investment. {keywords}. A long put is an excellent option when you anticipate the stock to fall considerably before the option ends ({keywords}). If the stock falls just slightly below the strike cost, the option will be in the cash, however might not return the premium paid, handing you a net loss ({keywords}).

Short put, This strategy is the flipside of the long put, however here the trader offers a put described as “going short” a put and anticipates the stock cost 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 make.

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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 contract pays a premium of $100, or one contract * $1 * 100 shares represented per contract. Here’s the profit on the brief 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 make some however not all of the premium – {keywords}. The benefit on the brief put is never ever more than the premium received, $100 here ({keywords}). Like the brief call or covered call, the optimum return on a short put is what the seller receives upfront ({keywords}).

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