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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 choice expiration at $19 per share, or the strike cost minus the $1 premium paid. Listed below $19 the put increases in value $100 for each dollar decline in the stock. best options trading platform. {keywords}.

The benefit on a long put is nearly as great as on a long call, because the gain can be multiples of the alternative premium paid. However, a stock can never go listed below zero, topping the benefit, whereas the long call has in theory unrestricted advantage. Long puts are another simple and popular method to bet on the decline 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 cost at expiration of the choice, the put expires worthless and you’ll lose your financial investment. {keywords}. A long put is a great option when you expect the stock to fall significantly before the alternative expires ({keywords}). If the stock falls just a little below the strike cost, the option will be in the money, however may not return the premium paid, handing you a bottom line ({keywords}).

Short put, This method is the flipside of the long put, however here the trader offers a put referred to as “going short” a put and anticipates the stock price to be above the strike rate by expiration – {keywords}. In exchange for offering 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 cost of $20 and expiration in 4 months is trading at $1 ({keywords}). The contract pays a premium of $100, or one contract * $1 * 100 shares represented per agreement. Here’s the earnings on the brief put at expiration: In this example, the brief 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 however not all of the premium – {keywords}. The advantage on the short put is never ever 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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