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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 choice 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 decline in the stock. what is options trading. {keywords}.

The upside on a long put is almost as great as on a long call, because the gain can be multiples of the alternative premium paid. However, a stock can never go listed below zero, capping the advantage, whereas the long call has theoretically limitless benefit. Long puts are another easy and popular method to bet on the decrease of a stock, and they can be safer than shorting a stock ({keywords}).

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If the stock closes above the strike price at expiration of the choice, 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 substantially before the choice expires ({keywords}). If the stock falls only somewhat below the strike cost, the option will be in the cash, however may not return the premium paid, handing you a net loss ({keywords}).

Short put, This strategy 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 rate to be above the strike cost by expiration – {keywords}. In exchange for offering a put, the trader gets a money 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 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 contract. Here’s the profit on the brief put at expiration: In this example, the brief put breaks even at $19, or the strike rate less the premium received.

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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 short put is never more than the premium got, $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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