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Here’s the earnings 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 price minus the $1 premium paid. Below $19 the put increases in worth $100 for every single dollar decrease in the stock. best options trading platform. {keywords}.

The upside on a long put is practically as great as on a long call, since the gain can be multiples of the option premium paid. A stock can never go listed below no, topping the advantage, whereas the long call has theoretically unlimited benefit. Long puts are another basic and popular way 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 choice, the put ends useless and you’ll lose your investment. {keywords}. A long put is an excellent choice when you expect the stock to fall significantly before the option ends ({keywords}). If the stock falls only a little listed below the strike rate, the option will remain in the cash, but might not return the premium paid, handing you a bottom line ({keywords}).

Short put, This method 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 cost 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 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 four months is trading at $1 ({keywords}). The contract pays a premium of $100, or one agreement * $1 * 100 shares represented per contract. Here’s the profit on the short put at expiration: In this example, the brief 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 earn some but not all of the premium – {keywords}. The benefit on the brief put is never more than the premium received, $100 here ({keywords}). Like the brief call or covered call, the maximum return on a brief put is what the seller gets upfront ({keywords}).

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