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Here’s the earnings 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. Listed below $19 the put increases in worth $100 for every dollar decrease in the stock. best options trading platform. {keywords}.

The advantage on a long put is nearly as great as on a long call, since the gain can be multiples of the alternative premium paid. A stock can never go listed below no, capping the upside, whereas the long call has theoretically limitless benefit. Long puts are another basic 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 cost at expiration of the alternative, the put expires worthless and you’ll lose your financial investment. {keywords}. A long put is a good choice when you expect the stock to fall significantly before the option expires ({keywords}). If the stock falls only a little below the strike cost, the choice will be 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, however here the trader sells a put described as “going short” a put and expects the stock rate to be above the strike rate by expiration – {keywords}. In exchange for offering a put, the trader receives a cash premium, which is the most a short 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 4 months is trading at $1 ({keywords}). The agreement pays a premium of $100, or one contract * $1 * 100 shares represented per agreement. Here’s the revenue on the brief 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 upside on the brief put is never more than the premium received, $100 here ({keywords}). Like the short call or covered call, the maximum return on a short put is what the seller gets upfront ({keywords}).

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