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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 value $100 for each dollar decrease in the stock. robinhood options trading. {keywords}.

The upside on a long put is nearly as great as on a long call, because the gain can be multiples of the option premium paid. A stock can never ever go listed below absolutely no, capping the benefit, whereas the long call has theoretically unlimited benefit. Long puts are another basic and popular way to wager on the decrease of a stock, and they can be 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 financial investment. {keywords}. A long put is an excellent option when you expect the stock to fall substantially prior to the alternative ends ({keywords}). If the stock falls just somewhat listed below the strike price, the option will remain in the money, but may not return the premium paid, handing you a net loss ({keywords}).

Short put, This technique is the flipside of the long put, however here the trader offers a put referred to as “going short” a put and expects the stock price to be above the strike rate by expiration – {keywords}. In exchange for selling a put, the trader receives a money premium, which is the most a brief put can earn.

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Stock X is trading for $20 per share, and a put with a strike price of $20 and expiration in 4 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 cost less the premium received.

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In between $19 and $20, the put seller would earn 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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