Bearish Risk Reversal option strategy
Bearish Risk Reversal buys an OTM Put and funds it by selling an OTM Call. It costs little or nothing to enter and gains when the underlying falls past the put strike.
Payoff at expiry
Nifty, lot size 65 · Nifty future 25,151 · 17 Nov 2026Legs
| Action | Option | Strike | Lots | Qty | Premium |
|---|---|---|---|---|---|
| BUY | OTM Put | 25,100 | 1 | 65 | ₹88.25 |
| SELL | OTM Call | 25,200 | 1 | 65 | ₹89.25 |
How it works
- Buy 1 OTM put at the 25,100 strike for ₹88.25, paying the premium.
- Sell 1 OTM call at the 25,200 strike for ₹89.25, collecting the premium.
- You receive a net ₹65 upfront for the position.
Below 25,197 you profit, and profit grows as Nifty falls.
Above 25,197 you lose, and the loss keeps growing as Nifty rises.
Set-up: Buy 1 lot OTM Put and Sell 1 lot OTM Call with same expiration date.
What happens if Nifty moves
Profit or loss at expiry| Nifty at expiry | Move | Profit / loss |
|---|---|---|
| 23,650 | −6% | +₹94,315 |
| 24,400 | −3% | +₹45,565 |
| 24,900 | −1% | +₹13,065 |
| 25,150 | Unchanged | +₹65 |
| 25,400 | +1% | −₹12,935 |
| 25,900 | +3% | −₹45,435 |
| 26,650 | +6% | −₹94,185 |
How the Greeks affect it
When to use
When you are bearish, expect a move down, and are willing to take on upside risk above the call strike.
- Low or zero cost to enter.
- Flat zone between the strikes gives room for noise.
- Useful as a hedge against a fall.
Things to watch
- Uncapped risk above the call strike.
- Requires margin for the short call.
- No gain unless the underlying crosses the put strike.
Bearish Risk Reversal: questions
What is a Bearish Risk Reversal strategy?
Bearish Risk Reversal buys an OTM Put and funds it by selling an OTM Call. It costs little or nothing to enter and gains when the underlying falls past the put strike.
When should you use a Bearish Risk Reversal?
When you are bearish, expect a move down, and are willing to take on upside risk above the call strike.
How do you set up a Bearish Risk Reversal?
Buy 1 lot OTM Put and Sell 1 lot OTM Call with same expiration date.
What is the maximum profit of a Bearish Risk Reversal?
Substantial below the put strike plus or minus the net premium.
What is the maximum loss of a Bearish Risk Reversal?
Unlimited above the call strike, as the short call loses with every rise in the underlying.
What is the breakeven of a Bearish Risk Reversal?
With Nifty at 25,151, the example on this page breaks even at 25,197 at expiry.
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