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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 option expiration at $19 per share, or the strike rate minus the $1 premium paid. Below $19 the put increases in value $100 for each dollar decrease in the stock. options trading. {keywords}.

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

Short put, This method is the flipside of the long put, however here the trader offers a put described as “going short” a put and expects 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 short put can earn.

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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 earnings on the short put at expiration: In this example, the short put breaks even at $19, or the strike cost less the premium got.

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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 short put is what the seller receives upfront ({keywords}).

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