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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 value $100 for every dollar decline in the stock. trading options. {keywords}.

The advantage on a long put is nearly as good as on a long call, because the gain can be multiples of the choice premium paid. A stock can never go below no, capping the benefit, whereas the long call has theoretically endless upside. Long puts are another basic and popular method 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 price at expiration of the alternative, the put ends useless and you’ll lose your financial investment. {keywords}. A long put is an excellent option when you expect the stock to fall significantly before the choice ends ({keywords}). If the stock falls just a little listed below the strike rate, the choice will remain in the cash, however may 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 offers a put referred to as “going short” a put and anticipates the stock rate to be above the strike rate by expiration – {keywords}. In exchange for offering a put, the trader gets 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 rate of $20 and expiration in four months is trading at $1 ({keywords}). The contract pays a premium of $100, or one agreement * $1 * 100 shares represented per agreement. Here’s the revenue on the short put at expiration: In this example, the short put breaks even at $19, or the strike cost less the premium got.

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In between $19 and $20, the put seller would make some but not all of the premium – {keywords}. The benefit on the short 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 receives upfront ({keywords}).

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