A Put option gives its buyer the right, but not the obligation, to sell the underlying asset at the strike price, by or on expiry. Buying a Put is a bearish position — it profits if the underlying’s price falls below the strike price by more than the premium paid. Puts are also commonly used to hedge (protect) an existing stock holding. Contract specifications for index and stock options are published by the NSE.
Related Reading
See the full Call vs Put comparison, including all four basic Option positions, in Call Options vs Put Options: What’s the Difference?. Module 7 covers Put options in complete depth.
Example
An investor buys one Nifty 24,700 Put for a ₹120 premium. If Nifty falls to 24,400 by expiry, the Put is worth 300 points (24,700 − 24,400) of intrinsic value — a profit of ₹180 per share after the premium paid. If Nifty instead closes above 24,700, the Put expires worthless and the buyer's loss is capped at the ₹120 premium.
Frequently Asked Questions
What is the maximum loss when buying a Put option?
The premium paid, and nothing more — a Put buyer's downside is capped even if the underlying doesn't move as expected, unlike selling a Put, where losses can be substantial if the underlying falls sharply.
How is buying a Put different from short-selling a stock?
Short-selling has theoretically unlimited loss potential if the price rises and requires borrowing shares, while a bought Put's loss is capped at the premium paid and requires no borrowing.
Can a Put option on an Indian index be exercised before expiry?
No. Index and stock options on Indian exchanges are European-style, meaning they can only be exercised on the expiry date itself, not at any point before it.