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Long Put
bearishBuying 'Put option' is the most basic & simplest strategy. It is recommended when your outlook on the underlying asset is negative & you expect the underlying asset price to fall.
Example:
| Instrument | Qty | Price |
|---|---|---|
| BUY NIFTY 30-Jun-26 24100 PE | 65 | 108.2 |
When To Execute?
When you expect a fall in the underlying asset price
Trade
Buy 1 lot ATM Put
Advantages
Unlimited profit potential with capped risk
Possibility of greater leverage than selling naked future
Disadvantages
100% potential loss of premium in case of inappropriate strike, choice of stock, time decay
Greater leverage could prove detrimental in case the expected outlook fails
Maximum Profit
Maximum reward remains uncapped
Maximum Loss
Since it is a net debit trade you pay for buying the Put option upfront i.e. Premium. Your maximum risk is capped