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

The advantage on a long put is almost as good as on a long call, since the gain can be multiples of the alternative premium paid. However, a stock can never ever go below absolutely no, capping the advantage, whereas the long call has in theory endless upside. Long puts are another basic and popular way to bet on the decline 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 alternative, the put expires worthless and you’ll lose your investment. {keywords}. A long put is a good option when you expect the stock to fall substantially prior to the alternative ends ({keywords}). If the stock falls just somewhat below the strike cost, the alternative will be in the cash, but might not return the premium paid, handing you a bottom line ({keywords}).

Short put, This technique is the flipside of the long put, but here the trader offers a put referred to as “going short” a put and anticipates the stock price to be above the strike price by expiration – {keywords}. In exchange for selling a put, the trader gets a cash 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 cost 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 short put at expiration: In this example, the short 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 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 brief call or covered call, the maximum return on a brief put is what the seller receives upfront ({keywords}).

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