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What Is Option Trading: Beginner Tutorial For Dummies Ep 248 …

Here’s the revenue 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 single dollar decrease in the stock. day trading options. {keywords}.

The advantage on a long put is almost as great as on a long call, due to the fact that the gain can be multiples of the alternative premium paid. A stock can never ever go below zero, capping the benefit, whereas the long call has in theory unlimited advantage. Long puts are another easy and popular way to bet on the decline of a stock, and they can be much safer than shorting a stock ({keywords}).

What Is Option Trading: Beginner Tutorial For Dummies Ep 248 ...Options Trading 101 – What You Need To Know To Start

If the stock closes above the strike cost at expiration of the alternative, the put ends worthless and you’ll lose your investment. {keywords}. A long put is a great choice when you expect the stock to fall considerably before the choice ends ({keywords}). If the stock falls only slightly listed below the strike cost, the option will be 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, however here the trader offers a put described as “going short” a put and anticipates the stock price to be above the strike price by expiration – {keywords}. In exchange for selling a put, the trader receives a cash 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 cost 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 agreement. Here’s the revenue on the short put at expiration: In this example, the short put breaks even at $19, or the strike price less the premium got.

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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 brief call or covered call, the optimum return on a short put is what the seller gets in advance ({keywords}).

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