What is Protective Put?
Buy put against long shares — floor loss while keeping upside minus premium.
Formula
Protective Put Example: Own: 100 shares at $100 ($10,000 position) Buy: 1 $95 Put expiring in 60 days Premium Paid: $3.00 per share ($300) Scenarios at Expiration: Stock at $80 (crash): Stock loss: $2,000 Put value: $15 × 100 = $1,500 Net loss: $2,000 - $1,500 + $300 = $800 (vs $2,000 loss without put) Stock at $100 (unchanged): Stock: No gain/loss Put expires worthless Total loss: $300 (premium paid) Stock at $120 (rally): Stock gain: $2,000 Put expires worthless Net gain: $2,000 - $300 = $1,700
Indian market context (NSE)
Reference levels: Nifty 50 at 24,300, Reliance Industries at ₹1,300, Bank Nifty futures at 55,000 (lot size 30). Examples below show how Protective Put shows up on Indian index, equity, and futures books — update to live quotes in your journal.
Nifty 50 perspective
Nifty at 24,300: weekly/monthly option chains centre on round strikes (24,000 / 24,500). Protective Put on ATM Nifty options shifts quickly into expiry — India VIX and event risk (RBI, budget) reprice premiums independent of spot.
Reliance Industries perspective
Reliance at ₹1,300: stock options are American-style on NSE with liquidity concentrated near ATM strikes. Protective Put behaviour on ₹1,300 handle differs from index options — watch assignment on short ITM legs before expiry.
Bank Nifty futures perspective
Bank Nifty futures at 55,000: hedging with options or trading protective put on Bank Nifty weekly contracts — theta and gamma rise sharply into Thursday expiry; futures leg has no time decay but carries overnight gap risk.
How to validate
- Validate Protective Put separately for index weeklies vs stock options.
- Stress-test with expiry-week and event-week subsets (RBI, budget, results).
- Confirm margin and tail-loss scenarios are logged for short premium books.
- Discard readings polluted by untagged discretionary adjustments.
How to track in TradeLyser
- Tag every leg: structure, DTE, moneyness, and whether Protective Put was a primary driver.
- Log planned max loss ₹ on entry for short premium strategies.
- Weekly: list open short ITM/ATM legs before expiry with a written roll/close rule.
- Separate F&O account tags from cash equity for Protective Put statistics.
Best practices
- Size Protective Put trades with margin headroom for gaps and assignment.
- Prefer defined-risk structures when learning a new options concept.
- Roll or close based on written DTE rules, not convenience.
- Keep weekly index and monthly stock books in separate tags.
Common pitfalls
- Short premium without defined max loss while Protective Put risk builds.
- Holding illiquid stock options into expiry without a plan.
- Blending index and stock gamma exposure in one tag.
- Ignoring margin spikes on gap opens.
How to use this in TradeLyser
Log put strike, premium, and stock lot; review hedge P&L vs stock move.
Related terms
A covered call sells a call option while holding the underlying shares. Premium income trades against capped upside if stock rallies hard.
Hedging reduces exposure by taking positions that offset another book — e.g. Nifty puts against a long equity portfolio.
Going long means owning or benefiting from upward price movement — buying stock, calls, or futures.
A put option grants the buyer the right to sell the underlying at the strike. Buyers profit from declines; sellers take on obligation if assigned.
FAQ
Put strike at ATM or OTM?
Lower strike cheaper, less protection — note choice.
Hedge every long?
Plan says when required — tag optional hedges.
Start journaling with
TradeLyser
Connect your broker, tag strategies, and review performance with AI-assisted insights.