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Here’s the earnings 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 worth $100 for each dollar decrease in the stock. best options trading platform. {keywords}.

The benefit on a long put is nearly as excellent as on a long call, since the gain can be multiples of the alternative premium paid. However, a stock can never go below zero, capping the upside, whereas the long call has in theory unlimited advantage. Long puts are another simple and popular method to bet on the decline 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 alternative, the put expires useless and you’ll lose your financial investment. {keywords}. A long put is a great choice when you expect the stock to fall significantly prior to the alternative ends ({keywords}). If the stock falls just a little listed below the strike cost, the alternative will be in the money, but may not return the premium paid, handing you a net loss ({keywords}).

Short put, This method is the flipside of the long put, but here the trader offers 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 selling a put, the trader gets a cash 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 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 earnings on the brief put at expiration: In this example, the brief 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 make some but not all of the premium – {keywords}. The benefit on the brief put is never ever 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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