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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 worth $100 for every dollar decrease in the stock. what are options trading. {keywords}.

The upside on a long put is nearly as good as on a long call, since the gain can be multiples of the alternative premium paid. However, a stock can never go below no, capping the benefit, whereas the long call has in theory unlimited upside. Long puts are another simple and popular method to wager 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 rate at expiration of the choice, the put ends worthless and you’ll lose your financial investment. {keywords}. A long put is a good choice when you anticipate the stock to fall significantly prior to the choice ends ({keywords}). If the stock falls only a little listed below the strike cost, the alternative will remain 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 expects the stock rate to be above the strike cost by expiration – {keywords}. In exchange for offering a put, the trader receives a money premium, which is the most a short 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 4 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 short put at expiration: In this example, the short put breaks even at $19, or the strike cost less the premium got.

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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 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 gets in advance ({keywords}).

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