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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 option expiration at $19 per share, or the strike price minus the $1 premium paid. Below $19 the put increases in worth $100 for each dollar decrease in the stock. options trading robinhood. {keywords}.

The upside on a long put is practically as good as on a long call, due to the fact that the gain can be multiples of the choice premium paid. Nevertheless, a stock can never go listed below no, capping the upside, whereas the long call has in theory limitless benefit. Long puts are another simple and popular method 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 cost at expiration of the option, the put expires useless and you’ll lose your investment. {keywords}. A long put is a good choice when you expect the stock to fall significantly before the alternative ends ({keywords}). If the stock falls only a little listed below the strike rate, the option will be in the cash, however might not return the premium paid, handing you a bottom line ({keywords}).

Short put, This strategy is the flipside of the long put, but here the trader offers 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 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 rate of $20 and expiration in four 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 revenue 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 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 maximum return on a brief put is what the seller receives upfront ({keywords}).

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