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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 value $100 for every single dollar decrease in the stock. binary options trading. {keywords}.

The benefit on a long put is almost as excellent as on a long call, since the gain can be multiples of the alternative premium paid. A stock can never go below no, topping the upside, whereas the long call has in theory limitless advantage. Long puts are another easy and popular way to wager on the decline 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 rate at expiration of the alternative, the put ends worthless and you’ll lose your investment. {keywords}. A long put is a good option when you anticipate the stock to fall considerably prior to the option ends ({keywords}). If the stock falls just somewhat listed below the strike price, the choice will remain in the money, but may not return the premium paid, handing you a bottom line ({keywords}).

Short put, This strategy 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 price by expiration – {keywords}. In exchange for offering a put, the trader receives a money 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 four months is trading at $1 ({keywords}). The contract pays a premium of $100, or one contract * $1 * 100 shares represented per agreement. Here’s the earnings on the short put at expiration: In this example, the short put breaks even at $19, or the strike rate less the premium got.

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In between $19 and $20, the put seller would earn some however not all of the premium – {keywords}. The benefit on the brief put is never more than the premium got, $100 here ({keywords}). Like the short call or covered call, the optimum return on a short put is what the seller receives in advance ({keywords}).

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