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

Hi

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

Yeah.

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. 🙂

Its premium * lot size, Jitin. Lot size is a number, not in Rupees 🙂

Selling put option is riskier as the loss is infinite?

Is that correct?

I mean, you can cut your loss when you think the risk is going out of wack 🙂

I want to know that while buying a lot we must pay the full amount which is at LTP of the call or put option (including premium) or we must only pay only the premium amount.

Breakeven for call is more than strike price, breakeven for put is just less than the strike price, am i correct?

Yes, Abhishek. Thats correct.

Hi Sir

Thanks for the great content and really enjoyed the options trading video. I have a doubt regarding the squaring off of a call option. Suppose i have bought SBIN NOV 620 CE and the premium is Rs15 and lot size is 100. So my breakeven is 635 rs. Imagine that one week before the expiry the the stock went high to 660, which means my profit 25rsX100= 2500 rs. If i want to exit now, will i get the entire profit of 2500, or is there any premium for exiting.

Yes, that’s right. You can book your profits and cash out.

So the breakeven point for the put option is, Strike price-Premium paid=2560-72.5=2487.5Rupees per share

NIFTY 16th March 17250 PE – Premium – 230

Strike Price is 17250

Expiry Spot Price is 17075

For the person bought PE at 17250 with the premium paid of Rs. 230 – Break Even Point is [Strike Price – Premium Paide]

In my case 17250 – 230 = 17020

Profit at this juncture (Strike Price – Spot Price) ] – Premium Paid

50 x [(17250-17075)-230]

50 x 55

Profit at expiry day is 2750

Check this chapter Vijai – https://zerodha.com/varsity/chapter/options-m2m-and-pl/

Breakeven Point for put option buyer is 2,487.50/-.

It is true that the realised loss = premium * lot size for option buyer’s perspective but it’s also true that he/she can have that much amount of maximum loss only while the profit potential is infinite for the position take if the market trends in the desired direction.

Theoretically yes 🙂

Hi Karthik

In the Buyer & seller payoff graph for the put option, shouldn’t we show the x axis from higher to lower strike price, so the reader will understand that profit is made as the price goes down and the graph is in line with that.

Not sure if I fully understand your query, but usually, the X axis shows a steady progression in spot prices, from lowest to highest. This is the generally accepted norm.

Breakeven point for Buyer of Put Option = 2560 – 72.5

Breakeven point for Seller of Put Options = 2560 – 72.5

Break even Put is 2487.50

put option buyer B.E.P IS 2487.5

PUT OPTION SELLER B.E.P IS 2632.5

IS IT CORRECT SIR?

Yeah, as explained in the chapter 🙂

Hello Karthik,

Thanks for wonderful videos, you are very calm and composed to explain everything very clearly.

My question is if call or put option buyer has higher profit probability & limited loss risk while on the other hand seller has limited profit against risk of unlimited loss. why would one want to be a option seller..?

Hiren, glad you liked my explanation. Each trader comes with a different point of view and risk-reward appetite, hence their trading choice is all a function of that 🙂