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

The benefit on a long put is almost as good as on a long call, because the gain can be multiples of the alternative premium paid. Nevertheless, a stock can never go below zero, topping the upside, whereas the long call has in theory endless benefit. Long puts are another easy and popular way to wager on the decline 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 expires worthless and you’ll lose your financial investment. {keywords}. A long put is a great choice when you expect the stock to fall considerably before the choice expires ({keywords}). If the stock falls just a little below the strike rate, the alternative will be in the money, but may not return the premium paid, handing you a net loss ({keywords}).

Short put, This technique 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 cost by expiration – {keywords}. In exchange for offering a put, the trader gets a money 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 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 earnings 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 make 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 maximum return on a brief put is what the seller receives in advance ({keywords}).

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