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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. what is options trading. {keywords}.

The upside on a long put is almost as great as on a long call, since the gain can be multiples of the option premium paid. However, a stock can never ever go below zero, capping the advantage, whereas the long call has theoretically limitless upside. Long puts are another easy and popular way to wager on the decline 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 option, the put ends worthless and you’ll lose your financial investment. {keywords}. A long put is a great choice when you anticipate the stock to fall considerably prior to the choice expires ({keywords}). If the stock falls just a little below the strike price, the choice will remain in the cash, however may not return the premium paid, handing you a bottom line ({keywords}).

Short put, This technique is the flipside of the long put, but here the trader offers a put referred to as “going short” a put and expects the stock cost to be above the strike rate by expiration – {keywords}. In exchange for selling a put, the trader gets a money 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 cost 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 short 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 make some but not all of the premium – {keywords}. The advantage on the short put is never more than the premium got, $100 here ({keywords}). Like the brief call or covered call, the maximum return on a brief put is what the seller receives upfront ({keywords}).

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