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Here’s the profit 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 price minus the $1 premium paid. Listed below $19 the put increases in worth $100 for every dollar decrease in the stock. what are options trading. {keywords}.

The advantage on a long put is practically as good as on a long call, because the gain can be multiples of the alternative premium paid. A stock can never go below no, capping the benefit, whereas the long call has theoretically unrestricted advantage. Long puts are another basic and popular method to bet on the decrease 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 price at expiration of the option, the put ends useless and you’ll lose your financial investment. {keywords}. A long put is an excellent choice when you expect the stock to fall significantly before the choice expires ({keywords}). If the stock falls only somewhat below the strike price, the alternative will be in the cash, however might not return the premium paid, handing you a bottom line ({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 expects the stock price to be above the strike rate by expiration – {keywords}. In exchange for selling a put, the trader gets a cash premium, which is the most a brief 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 4 months is trading at $1 ({keywords}). The agreement pays a premium of $100, or one contract * $1 * 100 shares represented per contract. Here’s the earnings on the brief 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 earn some however not all of the premium – {keywords}. The advantage on the short put is never more than the premium got, $100 here ({keywords}). Like the brief call or covered call, the maximum return on a short put is what the seller gets upfront ({keywords}).

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