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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 rate minus the $1 premium paid. Below $19 the put increases in value $100 for every dollar decrease in the stock. binary options trading. {keywords}.

The benefit on a long put is nearly as good as on a long call, since the gain can be multiples of the alternative premium paid. A stock can never ever go listed below no, topping the advantage, whereas the long call has in theory limitless benefit. Long puts are another easy and popular way 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 cost at expiration of the choice, the put expires worthless and you’ll lose your investment. {keywords}. A long put is an excellent option when you expect the stock to fall substantially prior to the alternative expires ({keywords}). If the stock falls only somewhat below the strike cost, the alternative will be in the cash, however might 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 offers 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 offering a put, the trader gets 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 four months is trading at $1 ({keywords}). The agreement 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 brief put breaks even at $19, or the strike price less the premium received.

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

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