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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 alternative expiration at $19 per share, or the strike price minus the $1 premium paid. Below $19 the put increases in worth $100 for every dollar decline in the stock. options trading for beginners. {keywords}.

The benefit on a long put is nearly as good as on a long call, because the gain can be multiples of the option premium paid. A stock can never go listed below zero, topping the upside, whereas the long call has in theory unlimited advantage. Long puts are another basic and popular method to bet on the decrease of a stock, and they can be more secure than shorting a stock ({keywords}).

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If the stock closes above the strike cost at expiration of the option, the put expires worthless and you’ll lose your investment. {keywords}. A long put is a good option when you expect the stock to fall considerably prior to the choice expires ({keywords}). If the stock falls only slightly below the strike rate, the alternative will remain in the cash, but may not return the premium paid, handing you a net loss ({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 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 cost 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 contract. Here’s the revenue on the brief 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 make some but not all of the premium – {keywords}. The upside on the short put is never 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 upfront ({keywords}).

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