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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 every single dollar decrease in the stock. robinhood options trading. {keywords}.

The upside on a long put is nearly as good as on a long call, due to the fact that the gain can be multiples of the option premium paid. A stock can never ever go below no, capping the benefit, whereas the long call has in theory endless advantage. Long puts are another simple and popular way to wager 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 choice, the put expires worthless and you’ll lose your financial investment. {keywords}. A long put is an excellent option when you anticipate the stock to fall considerably before the option ends ({keywords}). If the stock falls just somewhat listed below the strike rate, the option will remain in the money, but might not return the premium paid, handing you a bottom line ({keywords}).

Short put, This method is the flipside of the long put, but here the trader sells a put described as “going short” a put and expects the stock price to be above the strike cost 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 contract pays a premium of $100, or one contract * $1 * 100 shares represented per contract. Here’s the earnings on the short put at expiration: In this example, the brief put breaks even at $19, or the strike rate less the premium got.

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

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