Long Put Strategy

Introduction

The long put is the second basic option strategy. It simply means buying a put option. You use it when you are clearly bearish, or when you want to protect your portfolio from a fall.

When to Use a Long Put

• You expect the price to fall meaningfully in a short time.
• You want limited risk instead of short selling with unlimited risk.
• You want to hedge shares you already hold.

Payoff at Expiry

• Maximum loss: premium paid.
• Breakeven: strike - premium.
• Maximum profit: grows as the price falls below breakeven.

Complete Example (Illustrative)

Nifty is at 24,000 after a strong rally and has formed a bearish reversal pattern at resistance. You expect a fall to 23,600.

• Buy one lot of the 24,000 put at Rs 170. Lot size 65. Cost = Rs 11,050.
• Breakeven at expiry = 23,830.
• Premium stop-loss: exit if the premium falls to Rs 110.
• Chart stop-loss: exit if Nifty closes above the recent high.
• Target: exit when Nifty reaches 23,600, when the premium may be around Rs 420. Profit about (420 - 170) x 65 = Rs 16,250.

Payoff Table at Expiry

Long Put as Portfolio Insurance

If you hold a portfolio of large-cap stocks and fear a market fall over the next month, buying Nifty puts can offset part of the loss. The premium is the cost of this insurance.

Tips for Better Long Puts

• Markets often fall faster than they rise, so puts can gain quickly. Book profits at your target.
• Put premiums often become expensive when markets are already falling sharply. Buying late can be costly.
• Use ATM or slightly ITM strikes and enough days to expiry.

Place a Long Put on GoPocket

• Open Nifty or an F&O stock in the F&O segment on the GoPocket app.
• Select the expiry and the ATM put.
• Tap Buy, choose a Limit order and one lot.
• Place a stop-loss and plan your exit before entering.

Key Takeaways

• Long put = buy a put when bearish or to hedge.
• Risk is limited to the premium; breakeven is strike - premium.
• Safer than short selling for most traders.

Disclaimer: Illustrative example. Lot size as per NSE at the time of writing. Derivatives involve high risk.