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

The benefit on a long put is nearly as excellent as on a long call, since the gain can be multiples of the alternative premium paid. A stock can never ever go below absolutely no, capping the benefit, whereas the long call has in theory endless upside. Long puts are another basic 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 expires ({keywords}). If the stock falls only a little below the strike price, the choice will be in the cash, however may not return the premium paid, handing you a bottom line ({keywords}).

Short put, This technique is the flipside of the long put, but here the trader offers a put described as “going short” a put and anticipates the stock rate 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 short put can earn.

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Stock X is trading for $20 per share, and a put with a strike rate of $20 and expiration in 4 months is trading at $1 ({keywords}). The agreement pays a premium of $100, or one contract * $1 * 100 shares represented per contract. Here’s the profit 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 earn some but not all of the premium – {keywords}. The benefit on the short put is never more than the premium received, $100 here ({keywords}). Like the brief call or covered call, the optimum return on a brief put is what the seller gets in advance ({keywords}).

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