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Here’s the revenue 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 price minus the $1 premium paid. Below $19 the put increases in worth $100 for every dollar decline in the stock. options trading robinhood. {keywords}.

The benefit on a long put is nearly as great as on a long call, since the gain can be multiples of the option premium paid. Nevertheless, a stock can never go below no, capping the upside, whereas the long call has in theory limitless benefit. Long puts are another simple and popular method to bet on the decrease of a stock, and they can be safer than shorting a stock ({keywords}).

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If the stock closes above the strike price at expiration of the alternative, the put ends useless and you’ll lose your financial investment. {keywords}. A long put is a great choice when you anticipate the stock to fall considerably prior to the alternative expires ({keywords}). If the stock falls only slightly below the strike price, the option will remain in the cash, however may not return the premium paid, handing you a net loss ({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 cash 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 rate of $20 and expiration in four months is trading at $1 ({keywords}). The contract pays a premium of $100, or one agreement * $1 * 100 shares represented per contract. Here’s the revenue on the short 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 earn some however not all of the premium – {keywords}. The advantage on the short put is never more than the premium received, $100 here ({keywords}). Like the short call or covered call, the optimum return on a short put is what the seller gets in advance ({keywords}).

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