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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 price minus the $1 premium paid. Below $19 the put increases in value $100 for every dollar decline in the stock. best options trading platform. {keywords}.

The benefit on a long put is almost as great as on a long call, since the gain can be multiples of the alternative premium paid. A stock can never go below zero, capping the upside, whereas the long call has theoretically limitless benefit. Long puts are another basic and popular method to bet on the decline of a stock, and they can be more secure than shorting a stock ({keywords}).

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If the stock closes above the strike price at expiration of the choice, the put expires useless and you’ll lose your investment. {keywords}. A long put is a good choice when you expect the stock to fall substantially before the option ends ({keywords}). If the stock falls only somewhat listed below the strike cost, the alternative will be in the money, but might not return the premium paid, handing you a net loss ({keywords}).

Short put, This strategy is the flipside of the long put, but here the trader sells a put referred to as “going short” a put and expects the stock cost to be above the strike cost by expiration – {keywords}. In exchange for selling a put, the trader receives a money premium, which is the most a brief put can make.

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Stock X is trading for $20 per share, and a put with a strike rate of $20 and expiration in four 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 profit on the brief put at expiration: In this example, the short put breaks even at $19, or the strike price less the premium received.

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

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