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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 rate minus the $1 premium paid. Listed below $19 the put increases in value $100 for every dollar decline in the stock. best options trading platform. {keywords}.

The advantage on a long put is almost as great as on a long call, because the gain can be multiples of the choice premium paid. A stock can never go below zero, capping the benefit, whereas the long call has theoretically endless advantage. Long puts are another simple 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 cost at expiration of the option, the put expires worthless and you’ll lose your financial investment. {keywords}. A long put is an excellent choice when you expect the stock to fall considerably prior to the option ends ({keywords}). If the stock falls only a little below the strike rate, the choice will remain in the cash, however may not return the premium paid, handing you a net loss ({keywords}).

Short put, This strategy is the flipside of the long put, but here the trader sells a put described as “going short” a put and anticipates the stock rate to be above the strike price by expiration – {keywords}. In exchange for offering a put, the trader receives a cash 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 cost of $20 and expiration in 4 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 profit on the brief put at expiration: In this example, the brief put breaks even at $19, or the strike rate 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 upside 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 short put is what the seller receives upfront ({keywords}).

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