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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 option expiration at $19 per share, or the strike price minus the $1 premium paid. Below $19 the put increases in worth $100 for every single dollar decrease in the stock. options trading for beginners. {keywords}.

The upside on a long put is almost 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 no, capping the advantage, whereas the long call has in theory unrestricted benefit. Long puts are another basic 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 price at expiration of the option, the put ends worthless and you’ll lose your investment. {keywords}. A long put is a good choice when you anticipate the stock to fall considerably before the option expires ({keywords}). If the stock falls only slightly below the strike rate, the choice will be in the cash, but may not return the premium paid, handing you a bottom line ({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 expects the stock rate to be above the strike price 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 agreement * $1 * 100 shares represented per agreement. Here’s the profit on the brief put at expiration: In this example, the short put breaks even at $19, or the strike price less the premium got.

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Between $19 and $20, the put seller would earn some however not all of the premium – {keywords}. The advantage on the short 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 receives in advance ({keywords}).

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