Protective Put option strategy
Protective Put holds a long future and buys an OTM Put as insurance. It keeps the upside of the future while capping the loss below the put strike.
Payoff at expiry
Nifty, lot size 65 · Nifty future 22,650 · 27 Oct 2026Legs
| Action | Option | Strike | Lots | Qty | Premium |
|---|---|---|---|---|---|
| BUY | Future | – | 1 | 65 | 22,650 |
| BUY | OTM Put | 22,600 | 1 | 65 | ₹266.06 |
How it works
- Buy 1 lot of the future at 22,650.
- Buy 1 OTM put at the 22,600 strike for ₹266.06, paying the premium.
- You pay a net ₹17,294 upfront for the position. Your maximum loss is ₹20,531.
Below 22,916 you lose, up to ₹20,531.
Above 22,916 you profit, and profit keeps growing as Nifty rises.
Set-up: Buy 1 lot Future and Buy 1 lot OTM Put with same expiration date.
What happens if Nifty moves
Profit or loss at expiry| Nifty at expiry | Move | Profit / loss |
|---|---|---|
| 21,300 | −6% | −₹20,531 |
| 21,950 | −3% | −₹20,531 |
| 22,400 | −1% | −₹20,531 |
| 22,650 | Unchanged | −₹17,281 |
| 22,900 | +1% | −₹1,031 |
| 23,350 | +3% | +₹28,219 |
| 24,000 | +6% | +₹70,469 |
How the Greeks affect it
When to use
When you are bullish but want protection against a sharp fall, such as around an event.
- Unlimited upside with a known worst case.
- Works like insurance on a long position.
- No margin call risk below the put strike.
Things to watch
- Put premium is a cost that decays if the market does not fall.
- Reduces returns in a slow rally.
Protective Put: questions
What is a Protective Put strategy?
Protective Put holds a long future and buys an OTM Put as insurance. It keeps the upside of the future while capping the loss below the put strike.
When should you use a Protective Put?
When you are bullish but want protection against a sharp fall, such as around an event.
How do you set up a Protective Put?
Buy 1 lot Future and Buy 1 lot OTM Put with same expiration date.
What is the maximum profit of a Protective Put?
Unlimited as the underlying rises, less the premium paid for the put.
What is the maximum loss of a Protective Put?
Limited to the futures price less the put strike plus the premium paid.
What is the breakeven of a Protective Put?
With Nifty at 22,650, the example on this page breaks even at 22,916 at expiry.