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Here’s the profit 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 rate minus the $1 premium paid. Below $19 the put increases in value $100 for each dollar decline in the stock. options trading robinhood. {keywords}.

The upside on a long put is almost as great as on a long call, because the gain can be multiples of the choice premium paid. A stock can never go below zero, capping the advantage, whereas the long call has theoretically unlimited upside. 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 cost at expiration of the option, the put ends useless and you’ll lose your financial investment. {keywords}. A long put is a great choice when you expect the stock to fall considerably before the option expires ({keywords}). If the stock falls just a little listed below the strike price, the option will be in the cash, but 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 expects the stock price 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 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 revenue on the brief 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 earn some but not all of the premium – {keywords}. The upside on the short put is never ever more than the premium got, $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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