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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 cost minus the $1 premium paid. Below $19 the put increases in value $100 for every dollar decline in the stock. options trading. {keywords}.

The upside on a long put is practically as great as on a long call, because the gain can be multiples of the alternative premium paid. A stock can never go listed below zero, capping the advantage, whereas the long call has theoretically unrestricted benefit. Long puts are another easy and popular way to bet 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 worthless and you’ll lose your investment. {keywords}. A long put is an excellent option when you anticipate the stock to fall significantly prior to the choice expires ({keywords}). If the stock falls just a little below the strike price, the choice will remain in the cash, however may not return the premium paid, handing you a net loss ({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 selling 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 price 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 short put at expiration: In this example, the brief put breaks even at $19, or the strike rate less the premium received.

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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 short put is never more than the premium got, $100 here ({keywords}). Like the brief call or covered call, the optimum return on a brief put is what the seller receives upfront ({keywords}).

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