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

The advantage on a long put is almost as good as on a long call, due to the fact that the gain can be multiples of the option premium paid. However, a stock can never go listed below zero, capping the upside, whereas the long call has theoretically endless upside. Long puts are another easy and popular way to wager on the decline 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 anticipate the stock to fall substantially before the option expires ({keywords}). If the stock falls only slightly listed below the strike cost, the alternative will remain in the money, but might 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 sells a put described as “going short” a put and anticipates the stock cost to be above the strike rate by expiration – {keywords}. In exchange for offering a put, the trader gets 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 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 profit 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 make some but not all of the premium – {keywords}. The upside on the short put is never ever 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 in advance ({keywords}).

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