What It Means
A put option gives its buyer the right, but not the obligation, to sell the underlying asset at a fixed strike price on or before expiry. Traders buy puts to bet on a price fall, or to hedge a position they already hold.
Example
Say Nifty is at ₹24,500 and you buy a 24,000 put for a ₹150 premium. If Nifty falls to 23,700 by expiry, the put is worth at least ₹300, so you'd be in profit after the premium paid. If Nifty stays above 24,000, the put expires worthless and your loss is capped at the ₹150 you paid.
Warning
Buying a put isn't the same as short-selling the stock. Your maximum loss is limited to the premium paid, unlike a short position, which carries unlimited risk if the price rises instead.
Related Terms
- Call Option — the opposite bet, on a price rise
- Strike Price — the fixed price a put is written against
- Open Interest — tracked separately for puts and calls at every strike