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Here’s the profit 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 single dollar decline in the stock. day trading options. {keywords}.

The upside on a long put is nearly as great as on a long call, because the gain can be multiples of the alternative premium paid. However, a stock can never ever go below zero, topping the benefit, whereas the long call has theoretically unlimited upside. Long puts are another easy and popular way to bet on the decline 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 rate at expiration of the alternative, the put expires useless and you’ll lose your investment. {keywords}. A long put is an excellent option when you expect the stock to fall substantially prior to the alternative ends ({keywords}). If the stock falls only a little below the strike cost, the option will remain in the cash, but may not return the premium paid, handing you a net loss ({keywords}).

Short put, This technique is the flipside of the long put, but here the trader offers a put referred to as “going short” a put and anticipates the stock rate to be above the strike rate by expiration – {keywords}. In exchange for offering a put, the trader receives 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 cost 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 earnings on the short put at expiration: In this example, the short put breaks even at $19, or the strike rate less the premium got.

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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 short call or covered call, the maximum return on a brief put is what the seller receives upfront ({keywords}).

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