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

The benefit on a long put is practically as great as on a long call, since the gain can be multiples of the choice premium paid. Nevertheless, a stock can never go below zero, capping the benefit, whereas the long call has in theory limitless benefit. Long puts are another simple 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 cost at expiration of the option, the put ends useless and you’ll lose your investment. {keywords}. A long put is a great choice when you anticipate the stock to fall substantially prior to the option ends ({keywords}). If the stock falls just somewhat below the strike price, the alternative will be in the cash, however 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 sells a put referred to 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 gets a money premium, which is the most a short 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 four months is trading at $1 ({keywords}). The contract pays a premium of $100, or one contract * $1 * 100 shares represented per contract. Here’s the earnings on the brief put at expiration: In this example, the brief put breaks even at $19, or the strike price less the premium got.

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In 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 ever more than the premium got, $100 here ({keywords}). Like the brief call or covered call, the maximum return on a brief put is what the seller receives in advance ({keywords}).

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