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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 choice 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. binary 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 option premium paid. Nevertheless, a stock can never go below absolutely no, topping the benefit, whereas the long call has theoretically unrestricted benefit. Long puts are another easy and popular method to wager 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 cost at expiration of the choice, the put ends worthless and you’ll lose your financial investment. {keywords}. A long put is an excellent choice when you expect the stock to fall considerably before the choice ends ({keywords}). If the stock falls just a little listed below the strike rate, the choice will remain in the cash, but 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 rate to be above the strike rate 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 4 months is trading at $1 ({keywords}). The contract pays a premium of $100, or one agreement * $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 rate less the premium received.

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In between $19 and $20, the put seller would make some however not all of the premium – {keywords}. The benefit on the brief put is never ever more than the premium got, $100 here ({keywords}). Like the brief call or covered call, the optimum return on a brief put is what the seller gets upfront ({keywords}).

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