🎯 In 30 seconds: A put is the right to sell the underlying at the strike price. The buyer pays the premium and profits if the underlying ends below strike minus premium. The most the buyer can lose is the premium. That makes a put two things: a capped-risk bet on a fall, and insurance for shares you already own. The seller collects the premium, keeps margin, and loses if the underlying falls below the breakeven. Sellers of stock puts can end up having to buy a full lot of shares. With a Nifty lot of 65 (as of October 2026), a 24,000 put bought at 140 costs ₹9,100 and breaks even at 23,860.
What a put is, in one line
A put option gives its buyer the right, but not the obligation, to sell the underlying at the strike price at expiry. For a Nifty put, the sale is settled in cash: if the index ends below the strike, the buyer receives the difference times the lot size. For a stock put, an in-the-money position held to expiry ends with the buyer delivering shares and the seller paying for them.
The easiest way to think about a put is two-wheeler insurance. You pay a premium every year. If nothing happens, the premium is gone and you are fine with that, because you wanted protection, not profit. If the bike is stolen, the policy pays out. A put is a policy on a price: it pays when the price falls below a level you chose.
Puts are also the plain way for a retail trader in India to bet on a fall. You cannot hold a short position in shares overnight in the cash market as a retail trader (only intraday, or through securities lending and borrowing). Buying a put gives you a falling-price bet with a known maximum loss. Short selling in India covers the other routes.
Buying a put: the three numbers
- Cost (and maximum loss): premium x lot size. A Nifty 24,000 put at 140 points with a lot of 65 costs 140 x 65 = ₹9,100, plus charges.
- Breakeven at expiry: strike minus premium = 24,000 - 140 = 23,860.
- Profit per point below breakeven: one lot gains ₹65 for every Nifty point below 23,860 at expiry.
As with calls, the premium must be paid upfront: SEBI has required brokers to collect it from option buyers since 1 February 2025.
Worked example: one Nifty put at five expiry levels
Hypothetical numbers. Nifty is at 24,000. You buy one lot of the 24,000 put expiring in a week at 140 points.
| Nifty at expiry | Put value per unit | Value of one lot | Profit or loss | Return on ₹9,100 |
|---|---|---|---|---|
| 24,200 | 0 | ₹0 | -₹9,100 | -100% |
| 24,000 | 0 | ₹0 | -₹9,100 | -100% |
| 23,860 | 140 | ₹9,100 | ₹0 | 0% |
| 23,700 | 300 | ₹19,500 | +₹10,400 | +114% |
| 23,400 | 600 | ₹39,000 | +₹29,900 | +329% |
A 2.5% fall more than tripled the money. A flat or rising week cost all of it. The profit from a put is large but not unlimited: an index cannot fall below zero, so the most a 24,000 put can ever be worth is 24,000 points. In practice, markets fall much less than that, and usually faster than they rise.
If held to expiry in the money, the put is exercised automatically and the buyer pays STT of 0.15% of the intrinsic value (rate from 1 April 2026). At 23,700, the intrinsic value of one lot is ₹19,500, so STT is about ₹29. Selling the put in the market instead attracts 0.15% of the premium, paid by the seller.
Selling the put before expiry
Most retail traders close puts before expiry. Hypothetical: two days after you buy at 140, bad global news pushes the Nifty to 23,800 and the put trades at 260. Selling locks in (260 - 140) x 65 = ₹7,800 before charges.
A put also gains when fear rises, even before the index falls much, because the market starts paying more for protection. That is implied volatility at work. The reverse is just as real: after a big event passes quietly, puts can lose value fast even if the index has not moved.
A put compared with other ways to bet on a fall
| Intraday short in cash | Sell a Nifty futures lot | Buy a Nifty put | |
|---|---|---|---|
| Can you hold overnight? | No (retail cannot carry a short in cash shares overnight) | Yes, until expiry | Yes, until expiry |
| Money needed | Intraday margin | Margin on the full contract value of about ₹15 lakh | The premium only |
| Most you can lose | No fixed limit | No fixed limit (the index can rise a lot) | The premium |
| If the market goes nowhere | Roughly flat, less charges | Roughly flat, less charges | You lose time value, often all of it |
| If you are wrong | Loss grows with the price | Daily mark-to-market losses come out of your account | Loss stops at the premium |
The put trades open-ended risk for a fixed cost and a deadline. That is a reasonable trade when you expect a fall soon and can afford the premium. It is a poor trade when you expect a fall "eventually". Futures basics explains the futures column.
Puts as insurance: the protective put
Hypothetical: you own 1,000 shares of Sharma Foods Ltd at ₹1,500, worth ₹15 lakh. Results are due in three weeks and you are worried about a bad surprise, but you do not want to sell. Sharma Foods options have a hypothetical lot of 1,000 shares. You buy one lot of the monthly 1,450 put at ₹30. Cost: ₹30,000, or 2% of the holding.
- If the share falls to ₹1,200: the shares lose ₹3,00,000. The put is worth (1,450 - 1,200) x 1,000 = ₹2,50,000. Net loss: ₹3,00,000 - ₹2,50,000 + ₹30,000 = ₹80,000.
- If the share falls to ₹1,000: the shares lose ₹5,00,000, the put pays ₹4,50,000, and the net loss is still ₹80,000. The floor holds however far the price falls.
- If the share rises to ₹1,650: the shares gain ₹1,50,000, the put expires worthless, and the net gain is ₹1,20,000. You paid ₹30,000 for insurance you did not use.
The worst case is fixed: (₹1,500 - ₹1,450) x 1,000 + ₹30,000 = ₹80,000. Two India-specific points:
- You need a full lot of shares. One put covers exactly one lot. If you own 400 shares and the lot is 1,000, one put over-insures you, and a fraction of a put does not exist.
- Stock puts settle by delivery. If the put is in the money at expiry and you hold both, the put is exercised and your shares are delivered at ₹1,450. If you want to keep the shares, sell the put before expiry instead.
Many investors hold a mix of shares or a mutual fund rather than one stock. For them, a Nifty put is the usual hedge, sized by how closely the portfolio moves with the index. That calculation is in Hedging with protective puts, collars and Nifty puts.
Selling (writing) a put
The put seller receives the premium and takes on the obligation to pay out if the underlying falls below the strike.
Hypothetical: you sell one lot of the Nifty 24,000 put at 140 and receive ₹9,100. At expiry:
- Nifty at or above 24,000: you keep ₹9,100.
- Nifty at 23,860: you pay out 140 x 65. Net zero.
- Nifty at 22,800 (a 5% fall): you pay out 1,200 x 65 = ₹78,000. Net loss ₹68,900, more than seven times what you collected.
In the US, a common way to sell puts is "cash-secured": the seller keeps the full cost of buying the shares in the account. Indian brokers work differently. The seller posts margin set by the clearing corporation's risk system (SPAN plus exposure margin), which is a fraction of the contract value. That makes it easy to sell more puts than you could ever afford to settle, which is how a quiet strategy becomes a disaster in a crash. Selling puts in India covers this in detail.
A stock put seller faces one more thing. If the put is in the money at expiry, it is exercised and the seller must buy the full lot at the strike. On a hypothetical Sharma Foods 1,450 put with a lot of 1,000, that is ₹14.5 lakh, even if the share has fallen to ₹1,200.
No early assignment, but expiry week matters
In the US, stock options can be exercised early, so a put seller can be assigned before expiry. Indian options are European style: exercise happens only at expiry. NSE's settlement rules say in-the-money options are exercised automatically at expiry and assigned to sellers at random. So the surprise for a put seller in India is not early assignment. It is the delivery margin brokers start collecting in expiry week for stock options that look likely to end in the money, and the obligation to take delivery at the end. Exercise, assignment and expiry day walks through the timetable.
Try it
Pick a share you or your family already own that has options on NSE (the stock's page on NSE shows a derivatives tab if it does). Note the share price and the lot size. On the option chain for the monthly expiry, find the put one strike below the current price and note its last traded price. In a notebook, work out: the cost of one lot of puts; the worst-case loss on one lot of shares plus the put, using the formula (price - strike + premium) x lot; and that cost as a percentage of the holding. Then ask yourself: would you pay that percentage every month for this protection?
- You buy a Nifty 23,800 put at 93 points with a lot of 65. What is your cost and your breakeven? Answer: 93 x 65 = ₹6,045 plus charges. Breakeven is 23,800 - 93 = 23,707.
- The Nifty settles at 23,500. What is the put worth and what is your profit? Answer: 300 x 65 = ₹19,500. Profit is ₹19,500 - ₹6,045 = ₹13,455 before charges and STT.
- You own 1,000 shares at ₹1,500 and buy a 1,450 put at ₹30 with a lot of 1,000. What is your worst-case loss at expiry? Answer: (1,500 - 1,450 + 30) x 1,000 = ₹80,000.
- Why can a retail trader in India not simply short a share and hold it overnight in the cash market instead of buying a put? Answer: Retail short positions in the cash market must be closed the same day. Overnight bearish positions go through futures, puts or securities lending and borrowing.
- What extra obligation does a seller of a stock put face that a seller of a Nifty put does not? Answer: If the stock put ends in the money, the seller must buy the full lot of shares at the strike price, because stock options are physically settled.
Sources
- NSE: Equity derivatives settlement mechanism (European exercise, automatic exercise, random assignment)
- NSE: Nifty 50 futures and options, contract specifications
- NSE: Revision in market lot of derivative contracts on indices, 3 October 2025 (PDF)
- NSE: Changes in rates of Securities Transaction Tax, 31 March 2026 (PDF)
- SEBI: Measures to strengthen equity index derivatives framework, 1 October 2024
- NSE Clearing: Delivery margins for delivery settlement in equity derivatives, 17 January 2020 (PDF)