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Here’s the earnings 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. Listed below $19 the put increases in worth $100 for every dollar decline in the stock. best options trading platform. {keywords}.

The advantage on a long put is almost as good as on a long call, since the gain can be multiples of the option premium paid. A stock can never ever go below zero, capping the upside, whereas the long call has theoretically unrestricted benefit. Long puts are another easy and popular way to bet 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 rate at expiration of the alternative, the put ends useless and you’ll lose your financial investment. {keywords}. A long put is a good option when you expect the stock to fall significantly before the alternative ends ({keywords}). If the stock falls just a little below the strike price, the option will remain 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, however here the trader offers a put referred to as “going short” a put and expects the stock price 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 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 agreement. Here’s the profit 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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In between $19 and $20, the put seller would earn some however not all of the premium – {keywords}. The upside on the short put is never more than the premium received, $100 here ({keywords}). Like the short call or covered call, the optimum return on a short put is what the seller gets upfront ({keywords}).

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