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

The upside on a long put is practically as great as on a long call, because the gain can be multiples of the alternative premium paid. Nevertheless, a stock can never go listed below no, capping the advantage, whereas the long call has in theory limitless benefit. Long puts are another basic and popular way to bet on the decline of a stock, and they can be 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 expires useless and you’ll lose your investment. {keywords}. A long put is a great choice when you anticipate the stock to fall substantially before the option ends ({keywords}). If the stock falls only somewhat below the strike rate, the choice will be in the cash, but might not return the premium paid, handing you a net loss ({keywords}).

Short put, This strategy is the flipside of the long put, but here the trader sells a put referred to as “going short” a put and anticipates the stock rate to be above the strike cost by expiration – {keywords}. In exchange for selling a put, the trader receives 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 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 contract. Here’s the profit on the brief put at expiration: In this example, the brief put breaks even at $19, or the strike rate less the premium got.

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Between $19 and $20, the put seller would make some however not all of the premium – {keywords}. The advantage 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 gets upfront ({keywords}).

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