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

The upside on a long put is almost as great as on a long call, because the gain can be multiples of the option premium paid. A stock can never go below no, capping the advantage, whereas the long call has in theory unlimited advantage. Long puts are another simple and popular method to bet on the decrease 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 cost at expiration of the option, the put ends useless and you’ll lose your financial investment. {keywords}. A long put is a good choice when you anticipate the stock to fall significantly before the alternative ends ({keywords}). If the stock falls just a little listed below the strike price, the choice will remain in the cash, but may 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 expects the stock rate 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 price of $20 and expiration in four months is trading at $1 ({keywords}). The agreement pays a premium of $100, or one contract * $1 * 100 shares represented per contract. Here’s the revenue on the brief put at expiration: In this example, the brief put breaks even at $19, or the strike rate less the premium got.

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

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