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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 value $100 for every dollar decrease in the stock. robinhood 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 option premium paid. A stock can never go below no, topping the benefit, whereas the long call has theoretically unrestricted upside. Long puts are another easy and popular way to bet on the decline of a stock, and they can be more secure than shorting a stock ({keywords}).

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If the stock closes above the strike rate at expiration of the alternative, the put ends worthless and you’ll lose your financial investment. {keywords}. A long put is an excellent choice when you anticipate the stock to fall substantially before the option expires ({keywords}). If the stock falls just a little listed below the strike price, the option will be in the money, however might not return the premium paid, handing you a bottom line ({keywords}).

Short put, This method is the flipside of the long put, but here the trader sells a put referred to as “going short” a put and expects the stock cost to be above the strike price by expiration – {keywords}. In exchange for offering a put, the trader gets a money premium, which is the most a brief put can earn.

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Stock X is trading for $20 per share, and a put with a strike price of $20 and expiration in four months is trading at $1 ({keywords}). The contract pays a premium of $100, or one contract * $1 * 100 shares represented per agreement. Here’s the earnings on the brief put at expiration: In this example, the brief put breaks even at $19, or the strike cost less the premium received.

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In between $19 and $20, the put seller would make some but not all of the premium – {keywords}. The upside on the short put is never more than the premium received, $100 here ({keywords}). Like the brief call or covered call, the maximum return on a brief put is what the seller receives upfront ({keywords}).

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