Long Put
Buy a put option to profit from a fall in the underlying with limited risk and large downside-driven upside.
What is a Long Put?
A Long Put is the mirror image of the Long Call and the cornerstone bearish strategy. You pay a premium for the right to sell the underlying at a fixed strike. As the underlying falls, the put gains value. Your loss is capped at the premium, while profits build as price drops toward zero. It is also the classic tool for hedging — a portfolio holder can buy puts as 'insurance' against a crash.
Payoff Diagram
Profit & Loss at expiry
Per share (multiply by lot size 75). Gold dots mark breakeven points; green = profit, red = loss.
Construction
- Buy 1 ATM or slightly OTM Put.
- Pay the premium (debit) — your maximum loss.
- Match expiry to the expected timing of the down-move.
When to Use It
Use when you expect a sharp fall, or to hedge existing long holdings. Ideal when IV is low and a bearish catalyst looms. Puts often carry higher IV than calls (volatility skew) because markets fall faster than they rise, so factor in the cost.
The Greeks
Negative Delta (gains as price falls), Positive Gamma, Positive Vega, Negative Theta.
Risks & Considerations
- Time decay erodes value while you wait for the fall.
- Volatility crush after a known event can hurt even if direction is right.
- Full premium lost if the underlying stays at or above the strike at expiry.
Worked Example (Nifty)
Illustrative trade — lot size 75
Nifty at 20,000. Buy 20,000 PE for ₹200 (cost ₹15,000). Breakeven = 19,800. If Nifty falls to 19,400, intrinsic = ₹600, profit = (600 − 200) × 75 = ₹30,000. If Nifty closes at or above 20,000, you lose the ₹15,000 premium.