4.1 – Put Option
I hope by now you are through with the practicalities of a Call option from both the buyers’ and sellers’ perspectives. If you are indeed familiar with the call option, then orienting yourself to understand ‘Put Options’ is pretty straightforward. The only change in a put option (from the buyer’s perspective) is that the view on markets should be bearish instead of the bullish sentiment of a call option buyer.
Let’s learn more in this video.
We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.
Key takeaways from this chapter
- 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.
- The intrinsic value calculation of a Put option is slightly different from the intrinsic value calculation of a call option.
- IV (Put Option) = Strike Price – Spot Price
- The P&L of a Put Option buyer can be calculated as P&L = [Max (0, Strike Price – Spot Price)] – Premium Paid
- The breakeven point for the put option buyer is calculated as Strike – Premium Paid
Is the breakeven for that PE option is 2632.5 is that right:-Premium Paid+Strick Price
Yes, I guess ppl have commented on the videos as well.
Break even is 2487.50 i.e strike price minus premium
Yup, please do check the comments on youtube as well.
put option buyer & seller-breah even point-2487.50
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
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. 🙂
Its premium * lot size, Jitin. Lot size is a number, not in Rupees 🙂