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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 worth $100 for each dollar decline in the stock. options trading robinhood. {keywords}.

The benefit on a long put is almost as great as on a long call, since the gain can be multiples of the alternative premium paid. However, a stock can never go below zero, topping the upside, whereas the long call has in theory endless benefit. Long puts are another basic and popular method to bet 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 cost at expiration of the alternative, the put expires worthless and you’ll lose your investment. {keywords}. A long put is a great choice when you expect the stock to fall substantially prior to the option expires ({keywords}). If the stock falls only a little listed below the strike rate, the alternative 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 rate to be above the strike price by expiration – {keywords}. In exchange for selling a put, the trader gets a cash premium, which is the most a short 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 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 got.

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Between $19 and $20, the put seller would make some however not all of the premium – {keywords}. The advantage on the short put is never ever more than the premium received, $100 here ({keywords}). Like the brief call or covered call, the maximum return on a brief put is what the seller gets in advance ({keywords}).

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