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11.37Long Put

1What is it?

Buy a put option.

2Why does it exist?

When it is used: You expect a strong fall, or want insurance for holdings.

3Diagram
₹025,000BE 24,820ProfitLoss
Max profit
₹16,13,300
Max loss
₹11,700
Breakeven
₹24,820
Profit/loss at expiry for one lot (illustrative premiums). Green = profit zone, red = loss zone.
4Calculation
  1. Buy 25,000 PE at 180.
  2. Expiry 24,400 → (600 − 180) × 65 = +₹27,300.
  3. Expiry 25,100 → worthless → −₹11,700.
  4. Maximum profit: (Strike − premium) × lot if the index fell to 0 = 24,820 × 65 ≈ ₹16.1 lakh (large but limited)
  5. Maximum loss: Premium: 180 × 65 = ₹11,700
  6. Breakeven: Strike − premium = 24,820
5Risks
  • Limited-risk position: the most you can lose is known in advance.
  • Premiums shown are hypothetical; real premiums depend on volatility and time to expiry.
6Quick revision
  • Max profit: (Strike − premium) × lot if the index fell to 0 = 24,820 × 65 ≈ ₹16.1 lakh (large but limited)
  • Max loss: Premium: 180 × 65 = ₹11,700
  • Breakeven: Strike − premium = 24,820
7Knowledge check
Q1. Breakeven of a 25,000 put bought at 180?Show answer

24,820.

Q2. Max loss?Show answer

Premium paid.

Q3. Use as insurance?Show answer

Yes, to protect against falls in holdings.

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More in Level 11: Advanced Trading: Futures and Options (F&O)