   4: The Long Put Strategy Strategy: Long put Opening the Trade: "Buy to open" a put option Closing the Trade: 1. "Sell to close" a put option with the same strike and expiration 2. Let it expire worthless 3. Exercise it Summary: You think the stock price will fall, so you buy a put option on it. You are hoping the option price will increase (which will happen if the stock falls), so you can sell it. Or exercise it near expiration to sell the stock at more than current market price. (You will usually have to first purchase stock at the market price and then exercise your put to sell it at the higher strike price...) No margin is required to buy put options. You usually MUST tell your broker you wish to exercise an option BEFORE a set time on the third Friday of the month of expiration, or else you risk having an option worth hundreds or thousands of dollars expire worthless. I've heard people complain their brokers didn't automatically exercise their in the money option. Don't let it happen to you. Maximum Profit: Limited to the price of the current stock (if it falls to $0). Maximum Loss: The premium paid. Breakeven: You lose money on this trade if the stock price is above the strike price plus the premium paid on expiration day.  Figure 1: Buy 1 NOV 60 PUT on XYZ Example:
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