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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 price 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 advantage on a long put is almost as good as on a long call, since the gain can be multiples of the choice premium paid. A stock can never ever go below zero, topping the upside, whereas the long call has theoretically unlimited benefit. Long puts are another easy and popular method 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 rate at expiration of the option, the put expires worthless and you’ll lose your investment. {keywords}. A long put is a great option when you expect the stock to fall substantially prior to the option expires ({keywords}). If the stock falls just slightly listed below the strike price, the choice will be in the cash, however may not return the premium paid, handing you a net loss ({keywords}).

Short put, This strategy is the flipside of the long put, but here the trader sells a put referred to as “going short” a put and anticipates the stock price to be above the strike price by expiration – {keywords}. In exchange for selling a put, the trader receives a cash premium, which is the most a brief 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 contract pays a premium of $100, or one contract * $1 * 100 shares represented per contract. Here’s the profit on the brief put at expiration: In this example, the short put breaks even at $19, or the strike rate 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 brief 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 gets upfront ({keywords}).

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