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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 value $100 for each dollar decline in the stock. robinhood options trading. {keywords}.

The advantage on a long put is nearly as great as on a long call, since the gain can be multiples of the alternative premium paid. A stock can never go listed below no, topping the benefit, whereas the long call has in theory unlimited benefit. 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 rate at expiration of the option, the put ends worthless and you’ll lose your investment. {keywords}. A long put is a great choice when you anticipate the stock to fall substantially prior to the alternative expires ({keywords}). If the stock falls only a little below the strike cost, the alternative will be in the cash, however may not return the premium paid, handing you a net loss ({keywords}).

Short put, This technique is the flipside of the long put, however 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 gets 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 rate of $20 and expiration in 4 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 short put breaks even at $19, or the strike rate less the premium received.

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Between $19 and $20, the put seller would make some but not all of the premium – {keywords}. The advantage on the short put is never more than the premium got, $100 here ({keywords}). Like the short call or covered call, the maximum return on a short put is what the seller receives in advance ({keywords}).

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