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

The advantage on a long put is almost as good as on a long call, due to the fact that the gain can be multiples of the alternative premium paid. Nevertheless, a stock can never go below zero, topping the benefit, whereas the long call has theoretically endless advantage. Long puts are another easy and popular way to wager 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 rate at expiration of the choice, the put expires useless and you’ll lose your financial investment. {keywords}. A long put is a great option when you expect the stock to fall substantially before the option ends ({keywords}). If the stock falls just somewhat below the strike price, the alternative will remain in the cash, but may 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 anticipates the stock cost to be above the strike cost 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 price 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 earnings 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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Between $19 and $20, the put seller would earn some but not all of the premium – {keywords}. The benefit 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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