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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 alternative expiration at $19 per share, or the strike cost minus the $1 premium paid. Below $19 the put increases in value $100 for every single 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 choice premium paid. However, a stock can never ever go listed below absolutely no, topping the advantage, whereas the long call has theoretically limitless upside. Long puts are another basic and popular way 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 price at expiration of the option, the put expires worthless and you’ll lose your investment. {keywords}. A long put is a good choice when you expect the stock to fall considerably prior to the choice expires ({keywords}). If the stock falls only somewhat below the strike cost, the choice will remain in the cash, however may not return the premium paid, handing you a net loss ({keywords}).

Short put, This method is the flipside of the long put, but here the trader offers a put described as “going short” a put and anticipates the stock cost 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 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 agreement. Here’s the revenue on the brief 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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Between $19 and $20, the put seller would earn some however not all of the premium – {keywords}. The upside 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 receives in advance ({keywords}).

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