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Here’s the earnings 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 each dollar decline in the stock. robinhood options trading. {keywords}.

The benefit on a long put is almost as excellent as on a long call, because the gain can be multiples of the alternative premium paid. A stock can never go listed below zero, topping the upside, whereas the long call has theoretically endless benefit. Long puts are another basic and popular method to wager on the decrease of a stock, and they can be safer than shorting a stock ({keywords}).

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If the stock closes above the strike price at expiration of the option, the put expires useless and you’ll lose your financial investment. {keywords}. A long put is a great choice when you anticipate the stock to fall considerably prior to the alternative expires ({keywords}). If the stock falls just a little below the strike rate, the alternative will be in the money, but might not return the premium paid, handing you a net loss ({keywords}).

Short put, This method is the flipside of the long put, however here the trader offers a put referred to as “going short” a put and anticipates the stock price 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 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 price 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 upside on the brief put is never more than the premium received, $100 here ({keywords}). Like the brief call or covered call, the maximum return on a short put is what the seller receives in advance ({keywords}).

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