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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 alternative expiration at $19 per share, or the strike price minus the $1 premium paid. Below $19 the put increases in worth $100 for every dollar decline in the stock. best options trading platform. {keywords}.

The benefit on a long put is nearly as good as on a long call, since the gain can be multiples of the option premium paid. However, a stock can never ever go below absolutely no, topping the benefit, whereas the long call has in theory endless advantage. Long puts are another easy and popular way to bet on the decline 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 choice, the put ends useless and you’ll lose your investment. {keywords}. A long put is a good choice when you anticipate the stock to fall substantially prior to the option ends ({keywords}). If the stock falls only a little below the strike cost, the alternative will be in the money, but may not return the premium paid, handing you a bottom line ({keywords}).

Short put, This method is the flipside of the long put, however here the trader sells a put described as “going short” a put and anticipates the stock rate to be above the strike rate by expiration – {keywords}. In exchange for selling a put, the trader gets a cash premium, which is the most a short put can earn.

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

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