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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 cost minus the $1 premium paid. Below $19 the put increases in worth $100 for every dollar decrease in the stock. best options trading platform. {keywords}.

The benefit on a long put is nearly as good as on a long call, since the gain can be multiples of the choice premium paid. A stock can never go below no, topping the benefit, whereas the long call has in theory unrestricted 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 rate at expiration of the option, 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 substantially before the option expires ({keywords}). If the stock falls just a little listed below the strike cost, the alternative will remain in the money, however may not return the premium paid, handing you a net loss ({keywords}).

Short put, This strategy 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 price by expiration – {keywords}. In exchange for offering a put, the trader receives 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 rate of $20 and expiration in 4 months is trading at $1 ({keywords}). The agreement pays a premium of $100, or one agreement * $1 * 100 shares represented per contract. Here’s the earnings on the short put at expiration: In this example, the short put breaks even at $19, or the strike rate 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 benefit on the brief put is never more than the premium got, $100 here ({keywords}). Like the short call or covered call, the maximum return on a short put is what the seller gets in advance ({keywords}).

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