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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 cost minus the $1 premium paid. Below $19 the put increases in value $100 for every single dollar decline in the stock. binary options trading. {keywords}.

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

Short put, This method is the flipside of the long put, but here the trader offers a put described as “going short” a put and anticipates the stock cost to be above the strike cost by expiration – {keywords}. In exchange for selling a put, the trader gets a cash 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 four 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 revenue 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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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 gets upfront ({keywords}).

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