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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. Listed below $19 the put increases in worth $100 for every dollar decrease in the stock. robinhood options trading. {keywords}.

The advantage on a long put is practically as great as on a long call, since the gain can be multiples of the alternative premium paid. However, a stock can never ever go below no, topping the upside, whereas the long call has theoretically limitless upside. Long puts are another easy 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 cost at expiration of the option, the put expires worthless and you’ll lose your investment. {keywords}. A long put is a great choice when you anticipate the stock to fall considerably prior to the option ends ({keywords}). If the stock falls only slightly listed below the strike price, the alternative will be in the money, however 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 described as “going short” a put and anticipates the stock cost to be above the strike price by expiration – {keywords}. In exchange for selling 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 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 revenue on the brief put at expiration: In this example, the brief put breaks even at $19, or the strike rate less the premium received.

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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 brief put is never more than the premium got, $100 here ({keywords}). Like the short call or covered call, the maximum return on a short put is what the seller gets in advance ({keywords}).

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