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How To Trade Stock Options For Beginners – Options Trading …

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

The benefit on a long put is nearly as great as on a long call, since the gain can be multiples of the alternative premium paid. A stock can never go listed below zero, topping the advantage, whereas the long call has in theory unrestricted upside. Long puts are another simple and popular method to bet on the decrease 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 cost at expiration of the alternative, the put ends worthless and you’ll lose your investment. {keywords}. A long put is a good choice when you expect the stock to fall substantially before the alternative expires ({keywords}). If the stock falls only slightly listed below the strike cost, the alternative will remain in the cash, but may not return the premium paid, handing you a net loss ({keywords}).

Short put, This technique is the flipside of the long put, however here the trader offers a put referred to as “going short” a put and expects the stock cost to be above the strike rate by expiration – {keywords}. In exchange for offering a put, the trader receives a cash 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 agreement pays a premium of $100, or one agreement * $1 * 100 shares represented per agreement. Here’s the earnings on the brief put at expiration: In this example, the brief 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 earn some but not all of the premium – {keywords}. The upside on the brief put is never ever more than the premium got, $100 here ({keywords}). Like the short call or covered call, the optimum return on a brief put is what the seller gets upfront ({keywords}).

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