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Here’s the revenue 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 rate minus the $1 premium paid. Below $19 the put increases in value $100 for each dollar decrease in the stock. options trading robinhood. {keywords}.

The advantage on a long put is practically as great as on a long call, because the gain can be multiples of the option premium paid. However, a stock can never go below no, capping the advantage, whereas the long call has in theory endless benefit. Long puts are another simple and popular method to bet on the decrease 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 option, the put ends worthless and you’ll lose your financial investment. {keywords}. A long put is a great choice when you anticipate the stock to fall substantially prior to the choice ends ({keywords}). If the stock falls just a little listed below the strike price, the choice will remain 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, however here the trader offers a put described as “going short” a put and expects the stock price to be above the strike cost by expiration – {keywords}. In exchange for selling 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 price of $20 and expiration in four months is trading at $1 ({keywords}). The contract 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 cost less the premium received.

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Between $19 and $20, the put seller would make 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 maximum return on a short put is what the seller receives in advance ({keywords}).

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