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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 value $100 for every dollar decline in the stock. robinhood options trading. {keywords}.

The upside on a long put is almost as good as on a long call, because the gain can be multiples of the alternative premium paid. A stock can never ever go below no, capping the advantage, whereas the long call has theoretically limitless advantage. Long puts are another easy and popular method to wager 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 useless and you’ll lose your investment. {keywords}. A long put is a good option when you expect the stock to fall significantly prior to the option ends ({keywords}). If the stock falls only slightly listed below the strike price, the alternative will remain in the cash, however might not return the premium paid, handing you a net loss ({keywords}).

Short put, This method is the flipside of the long put, however here the trader sells a put referred to 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 cash 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 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 revenue on the brief put at expiration: In this example, the brief put breaks even at $19, or the strike price less the premium received.

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Between $19 and $20, the put seller would earn some but not all of the premium – {keywords}. The upside on the short put is never ever more than the premium received, $100 here ({keywords}). Like the short call or covered call, the optimum return on a brief put is what the seller receives in advance ({keywords}).

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