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5 Options Trading Strategies For Beginners – Bankrate.com

Here’s the profit on the long put at expiration: In this example, the put breaks even when the stock closes at option 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. trading options. {keywords}.

The advantage on a long put is nearly as excellent as on a long call, since the gain can be multiples of the option premium paid. A stock can never ever go listed below zero, capping the upside, whereas the long call has in theory limitless advantage. Long puts are another easy and popular method to wager on the decline of a stock, and they can be more secure than shorting a stock ({keywords}).

5 Options Trading Strategies For Beginners - Bankrate.com5 Options Trading Strategies For Beginners – Bankrate.com

If the stock closes above the strike rate at expiration of the option, the put ends worthless and you’ll lose your investment. {keywords}. A long put is a good choice when you anticipate the stock to fall significantly prior to the option expires ({keywords}). If the stock falls only somewhat below the strike rate, the choice will remain in the money, but may not return the premium paid, handing you a net loss ({keywords}).

Short put, This method is the flipside of the long put, but here the trader offers a put referred to as “going short” a put and anticipates the stock price to be above the strike cost 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 agreement * $1 * 100 shares represented per agreement. Here’s the profit on the brief 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 but not all of the premium – {keywords}. The benefit 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 brief put is what the seller gets in advance ({keywords}).

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