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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 alternative expiration at $19 per share, or the strike cost minus the $1 premium paid. Below $19 the put increases in value $100 for every dollar decline in the stock. binary options trading. {keywords}.

The advantage on a long put is almost as excellent as on a long call, because the gain can be multiples of the choice premium paid. However, a stock can never ever go below no, topping the benefit, whereas the long call has in theory unrestricted advantage. Long puts are another basic and popular method to wager on the decline 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 choice, the put ends worthless and you’ll lose your investment. {keywords}. A long put is a great option when you anticipate the stock to fall considerably prior to the choice expires ({keywords}). If the stock falls only somewhat below the strike cost, the choice will remain in the money, but might not return the premium paid, handing you a bottom line ({keywords}).

Short put, This strategy is the flipside of the long put, however here the trader sells a put referred to as “going short” a put and expects the stock price to be above the strike price by expiration – {keywords}. In exchange for selling a put, the trader receives 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 price of $20 and expiration in four months is trading at $1 ({keywords}). The agreement pays a premium of $100, or one contract * $1 * 100 shares represented per agreement. Here’s the earnings on the short 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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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 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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