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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 rate minus the $1 premium paid. Below $19 the put increases in value $100 for each dollar decline in the stock. robinhood options trading. {keywords}.

The upside on a long put is nearly as great as on a long call, since the gain can be multiples of the choice premium paid. A stock can never go listed below zero, capping the upside, whereas the long call has in theory endless advantage. Long puts are another simple 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 choice, the put expires worthless and you’ll lose your financial investment. {keywords}. A long put is an excellent option when you expect the stock to fall considerably before the alternative expires ({keywords}). If the stock falls just slightly below the strike price, the alternative will remain in the cash, however may not return the premium paid, handing you a bottom line ({keywords}).

Short put, This strategy is the flipside of the long put, however here the trader sells a put described as “going short” a put and expects the stock cost to be above the strike rate by expiration – {keywords}. In exchange for selling a put, the trader gets a money premium, which is the most a brief 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 four months is trading at $1 ({keywords}). The agreement pays a premium of $100, or one contract * $1 * 100 shares represented per agreement. Here’s the profit on the brief put at expiration: In this example, the brief 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 earn some but not all of the premium – {keywords}. The benefit on the brief put is never more than the premium received, $100 here ({keywords}). Like the brief call or covered call, the optimum return on a brief put is what the seller gets in advance ({keywords}).

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