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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 value $100 for every single dollar decrease in the stock. options trading robinhood. {keywords}.

The advantage on a long put is almost as good as on a long call, since the gain can be multiples of the choice premium paid. However, a stock can never go below absolutely no, capping the benefit, whereas the long call has in theory unrestricted advantage. Long puts are another easy and popular method 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 choice, the put ends worthless and you’ll lose your investment. {keywords}. A long put is a great option when you anticipate the stock to fall substantially prior to the option ends ({keywords}). If the stock falls just somewhat below the strike cost, the option will be in the cash, but might not return the premium paid, handing you a bottom line ({keywords}).

Short put, This strategy is the flipside of the long put, however here the trader sells a put described as “going short” a put and expects 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 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 4 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 brief put at expiration: In this example, the short put breaks even at $19, or the strike cost less the premium received.

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Between $19 and $20, the put seller would make some however not all of the premium – {keywords}. The advantage on the short put is never ever more than the premium received, $100 here ({keywords}). Like the brief call or covered call, the optimum return on a brief put is what the seller receives upfront ({keywords}).

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