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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 cost minus the $1 premium paid. Below $19 the put increases in value $100 for each dollar decrease in the stock. what are options trading. {keywords}.

The benefit on a long put is almost as excellent as on a long call, because the gain can be multiples of the option premium paid. However, a stock can never ever go listed below no, capping the benefit, whereas the long call has in theory limitless benefit. Long puts are another simple and popular way to wager 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 rate at expiration of the choice, the put expires worthless and you’ll lose your financial investment. {keywords}. A long put is an excellent choice when you anticipate the stock to fall substantially before the choice expires ({keywords}). If the stock falls just slightly listed below the strike price, the alternative will remain in the cash, however 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 sells a put described as “going short” a put and anticipates 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 short put can earn.

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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 revenue on the brief put at expiration: In this example, the short put breaks even at $19, or the strike price less the premium received.

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Between $19 and $20, the put seller would earn some however not all of the premium – {keywords}. The advantage on the short put is never more than the premium got, $100 here ({keywords}). Like the short call or covered call, the optimum return on a short put is what the seller gets upfront ({keywords}).

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