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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 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 decrease in the stock. trading options. {keywords}.

The benefit on a long put is nearly as great as on a long call, since the gain can be multiples of the choice premium paid. However, a stock can never ever go below no, topping the advantage, whereas the long call has theoretically endless upside. Long puts are another basic and popular method 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 rate at expiration of the alternative, the put ends worthless and you’ll lose your investment. {keywords}. A long put is a good option when you expect the stock to fall significantly before the alternative ends ({keywords}). If the stock falls only slightly below the strike cost, the option will remain in the cash, however may 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 expects the stock price to be above the strike price by expiration – {keywords}. In exchange for selling a put, the trader receives a money premium, which is the most a brief 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 four months is trading at $1 ({keywords}). The agreement pays a premium of $100, or one agreement * $1 * 100 shares represented per agreement. Here’s the earnings on the short put at expiration: In this example, the short put breaks even at $19, or the strike cost less the premium received.

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Between $19 and $20, the put seller would earn some but not all of the premium – {keywords}. The benefit on the brief put is never more than the premium received, $100 here ({keywords}). Like the short call or covered call, the maximum return on a brief put is what the seller gets in advance ({keywords}).

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