Protective put
Hold the shares and buy a put below the current price. The put sets a floor under the loss until expiry, at the cost of its premium.
How it is built
- Hold shares equal to one lot of an F&O stock.
- Buy 1 lot of an out-of-the-money put on that stock.
A structure for a shareholder who wants a known worst case until expiry while keeping the upside.
Risks
- The premium is a cost every time the protection is renewed.
- Protection ends at expiry.
- Losses down to the put strike are still taken.
How the Greeks behave
- Delta
- Positive, lower than the shares alone
- Theta
- Negative
- Vega
- Positive
Worked example
| Leg | Price / premium per share | Cash flow |
|---|---|---|
| Hold shares (1 lot) | ₹1,000.00 | −₹5,00,000 |
| Buy 1 lot 920 PE | ₹2.60 | −₹1,301 |
Profit and loss at expiry
For the whole position, before charges.
Premiums are theoretical Black–Scholes values from round, illustrative inputs, not market prices. Charges and margin are not included.Price a single leg with your own numbers.
Frequently asked questions
What is the maximum loss with a protective put?
The drop from the purchase price to the put strike, plus the premium, times the lot size.
Is a protective put insurance?
It works like insurance until expiry: you pay a premium and the put pays out below its strike.
Can I protect a portfolio with Nifty puts?
Index puts can offset part of a portfolio fall if the portfolio moves with the index, but they do not match individual shares exactly.