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

The upside on a long put is almost as excellent as on a long call, because the gain can be multiples of the alternative premium paid. However, a stock can never ever go below zero, capping the benefit, whereas the long call has in theory limitless benefit. Long puts are another easy and popular method to bet on the decline of a stock, and they can be 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 great option when you anticipate the stock to fall substantially prior to the alternative ends ({keywords}). If the stock falls just a little listed below the strike cost, the choice will remain in the cash, but might not return the premium paid, handing you a bottom line ({keywords}).

Short put, This strategy is the flipside of the long put, however here the trader sells a put described as “going short” a put and anticipates the stock price 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 brief put can make.

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Stock X is trading for $20 per share, and a put with a strike price of $20 and expiration in four months is trading at $1 ({keywords}). The agreement pays a premium of $100, or one contract * $1 * 100 shares represented per contract. Here’s the profit on the short put at expiration: In this example, the short 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 however not all of the premium – {keywords}. The benefit on the brief put is never more than the premium received, $100 here ({keywords}). Like the brief call or covered call, the maximum return on a short put is what the seller receives upfront ({keywords}).

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