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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. Listed below $19 the put increases in worth $100 for each dollar decrease in the stock. robinhood options trading. {keywords}.

The benefit on a long put is almost as great as on a long call, since the gain can be multiples of the alternative premium paid. However, a stock can never go below zero, topping the advantage, whereas the long call has theoretically unlimited benefit. Long puts are another easy 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 alternative, the put expires worthless and you’ll lose your financial investment. {keywords}. A long put is a good choice when you expect the stock to fall significantly prior to the choice ends ({keywords}). If the stock falls just slightly below the strike cost, the option 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, but here the trader offers a put described as “going short” a put and expects the stock rate to be above the strike cost by expiration – {keywords}. In exchange for selling a put, the trader gets 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 agreement pays a premium of $100, or one contract * $1 * 100 shares represented per agreement. Here’s the earnings on the short 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 advantage on the brief put is never ever 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 gets in advance ({keywords}).

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