We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.


Key takeaways from this chapter

  1. Buy a Put Option when you are bearish about the underlying prospects. In other words, a Put option buyer is profitable only when the underlying declines in value.
  2. The intrinsic value calculation of a Put option is slightly different from the intrinsic value calculation of a call option.
  3. IV (Put Option) = Strike Price – Spot Price
  4. The P&L of a Put Option buyer can be calculated as P&L = [Max (0, Strike Price – Spot Price)] – Premium Paid
  5. The breakeven point for the put option buyer is calculated as Strike – Premium Paid

30 comments

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  1. Yogesh jadhav says:

    Hi

  2. samyak says:

    Is the breakeven for that PE option is 2632.5 is that right:-Premium Paid+Strick Price

  3. Ashwin says:

    Break even is 2487.50 i.e strike price minus premium

  4. sanjay shah says:

    put option buyer & seller-breah even point-2487.50

  5. Jitin Kapila says:

    I have a question and an errand:

    Question: The premium is the only price that the buyer has to pay as in is that not any multiplication with lot size.? For more clarity based on reliance example taken:
    Realised Loss = Premium Paid = 72.50
    OR
    Realised Loss = Premium Paid * Lot Size = 18,125 (72.50 * 250)

    Errand: At 4 Mins when mentioning the Lot Size of trade we added the rupee symbol to it.

    I all and whole thank you so much for this series. This is super super content to start things up. 🙂

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