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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 option expiration at $19 per share, or the strike price minus the $1 premium paid. Listed below $19 the put increases in value $100 for each dollar decrease in the stock. options trading robinhood. {keywords}.

The benefit on a long put is nearly as excellent as on a long call, because the gain can be multiples of the choice premium paid. Nevertheless, a stock can never go below zero, topping the advantage, whereas the long call has in theory endless benefit. Long puts are another simple 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 cost at expiration of the choice, the put expires useless and you’ll lose your investment. {keywords}. A long put is a great choice when you expect the stock to fall considerably prior to the choice expires ({keywords}). If the stock falls just slightly listed below the strike rate, the option will be in the cash, but may not return the premium paid, handing you a bottom line ({keywords}).

Short put, This method is the flipside of the long put, but here the trader offers a put described as “going short” a put and anticipates the stock cost to be above the strike cost by expiration – {keywords}. In exchange for selling 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 cost of $20 and expiration in 4 months is trading at $1 ({keywords}). The contract pays a premium of $100, or one contract * $1 * 100 shares represented per agreement. Here’s the earnings on the short put at expiration: In this example, the brief 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 make some but not all of the premium – {keywords}. The upside on the short put is never ever more than the premium got, $100 here ({keywords}). Like the brief call or covered call, the optimum return on a brief put is what the seller gets upfront ({keywords}).

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