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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 choice 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. binary options trading. {keywords}.

The upside on a long put is almost as excellent as on a long call, due to the fact that the gain can be multiples of the choice premium paid. A stock can never ever go below absolutely no, topping the advantage, whereas the long call has in theory limitless upside. Long puts are another simple and popular way to bet on the decrease 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 useless and you’ll lose your financial investment. {keywords}. A long put is a good choice when you expect the stock to fall substantially prior to the option ends ({keywords}). If the stock falls only somewhat listed below the strike rate, the option will remain in the cash, but might not return the premium paid, handing you a bottom line ({keywords}).

Short put, This technique is the flipside of the long put, however here the trader sells a put referred to as “going short” a put and expects the stock cost to be above the strike rate 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 cost of $20 and expiration in four 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 revenue 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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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 maximum return on a short put is what the seller receives in advance ({keywords}).

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