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

The upside on a long put is nearly as excellent as on a long call, because the gain can be multiples of the alternative premium paid. However, a stock can never ever go below zero, topping the upside, whereas the long call has in theory unrestricted benefit. Long puts are another easy and popular method to wager on the decrease 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 price at expiration of the choice, the put expires useless and you’ll lose your investment. {keywords}. A long put is a great choice when you anticipate the stock to fall considerably before the option ends ({keywords}). If the stock falls just slightly below the strike rate, the option will remain in the money, however may not return the premium paid, handing you a net loss ({keywords}).

Short put, This method is the flipside of the long put, but here the trader sells a put described as “going short” a put and anticipates the stock rate to be above the strike rate by expiration – {keywords}. In exchange for selling a put, the trader receives a cash premium, which is the most a brief 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 agreement. 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 received.

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

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