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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 alternative expiration at $19 per share, or the strike rate minus the $1 premium paid. Below $19 the put increases in value $100 for every dollar decrease in the stock. options trading robinhood. {keywords}.

The benefit on a long put is nearly as good as on a long call, due to the fact that the gain can be multiples of the choice premium paid. Nevertheless, a stock can never go below zero, capping the upside, whereas the long call has in theory unlimited upside. Long puts are another simple and popular method to wager on the decline of a stock, and they can be much safer than shorting a stock ({keywords}).

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If the stock closes above the strike cost at expiration of the alternative, the put ends useless and you’ll lose your financial investment. {keywords}. A long put is a good choice when you expect the stock to fall considerably prior to the option expires ({keywords}). If the stock falls just slightly below the strike price, the choice will remain in the cash, however might not return the premium paid, handing you a bottom line ({keywords}).

Short put, This technique is the flipside of the long put, but here the trader offers 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 offering 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 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 earn some however not all of the premium – {keywords}. The upside on the brief put is never more than the premium got, $100 here ({keywords}). Like the brief call or covered call, the optimum return on a short put is what the seller receives upfront ({keywords}).

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