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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 alternative expiration at $19 per share, or the strike cost minus the $1 premium paid. Below $19 the put increases in value $100 for every dollar decline in the stock. binary options trading. {keywords}.

The benefit on a long put is nearly as good as on a long call, because the gain can be multiples of the choice premium paid. A stock can never go listed below zero, topping the upside, whereas the long call has in theory limitless benefit. Long puts are another easy and popular way 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 price at expiration of the alternative, the put expires useless and you’ll lose your financial investment. {keywords}. A long put is a good option when you expect the stock to fall considerably before the alternative ends ({keywords}). If the stock falls just somewhat listed below the strike rate, the option will remain in the cash, however might not return the premium paid, handing you a net loss ({keywords}).

Short put, This technique is the flipside of the long put, but here the trader sells 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 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 contract pays a premium of $100, or one agreement * $1 * 100 shares represented per contract. Here’s the earnings on the brief 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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Between $19 and $20, the put seller would earn some however not all of the premium – {keywords}. The upside on the brief put is never ever more than the premium got, $100 here ({keywords}). Like the brief call or covered call, the optimum return on a brief put is what the seller gets upfront ({keywords}).

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