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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 every dollar decline in the stock. robinhood options trading. {keywords}.

The upside on a long put is practically as good as on a long call, since the gain can be multiples of the option premium paid. A stock can never go listed below zero, capping the benefit, whereas the long call has theoretically limitless advantage. Long puts are another simple and popular way to bet 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 price 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 option expires ({keywords}). If the stock falls just a little below the strike cost, the choice will remain in the cash, but may 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 sells a put described as “going short” a put and expects the stock price to be above the strike cost 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 price of $20 and expiration in 4 months is trading at $1 ({keywords}). The agreement pays a premium of $100, or one agreement * $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 got.

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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 brief call or covered call, the optimum return on a brief put is what the seller gets in advance ({keywords}).

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