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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. Listed below $19 the put increases in value $100 for every single dollar decline in the stock. best options trading platform. {keywords}.

The upside on a long put is almost as great as on a long call, because the gain can be multiples of the alternative premium paid. A stock can never go listed below no, capping the advantage, whereas the long call has theoretically unlimited upside. Long puts are another easy and popular way to wager on the decrease 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 price at expiration of the option, the put ends useless and you’ll lose your investment. {keywords}. A long put is an excellent option when you expect the stock to fall significantly prior to the option ends ({keywords}). If the stock falls only somewhat below the strike price, the option 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, but here the trader offers a put described as “going short” a put and expects the stock price to be above the strike cost by expiration – {keywords}. In exchange for offering a put, the trader receives 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 four 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 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 but not all of the premium – {keywords}. The advantage on the brief put is never ever 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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