Long Put Strategy
Buy a put option to profit from falling stock prices with limited risk.
What is a Long Put?
A Long Put is a bearish strategy where you buy a put option, giving you the right to sell 100 shares at a specific strike. You profit as the stock falls below your breakeven. Max loss is limited to the premium paid; max profit occurs if the stock goes to zero.
When to Use a Long Put
Use a Long Put when you expect a stock to fall significantly. Works well as portfolio insurance against a bearish market. Best entered when IV is low and you have a clear catalyst (earnings, economic data, technical breakdown).
Key Formulas
- Max Profit
- (Strike - Premium) × lot size (at underlying = 0)
- Max Loss
- Premium paid × lot size
- Breakeven
- Strike price - Premium paid
Example Trades
Buy 1 SPY $420 Put for $3.50. Max loss: $350. Breakeven: $416.50. Profit increases as SPY falls.
Buy 1 SENSEX 80000 Put for ₹250. Max loss: ₹5,000 (₹250 × 20). Breakeven: 79750. Profit increases as SENSEX falls below 79750.
Common Mistakes to Avoid
- Buying puts during earnings without understanding IV crush
- Choosing strikes too far OTM (low POP)
- Not scaling out as puts become profitable
- Holding to expiration unnecessarily (exit early on profit)
Related Strategies
Long Put FAQ
What is a Long Put?
A Long Put is a bearish strategy where you buy a put option, giving you the right to sell 100 shares at a specific strike. You profit as the stock falls below your breakeven. Max loss is limited to the premium paid; max profit occurs if the stock goes to zero.
When should I use a Long Put?
Use a Long Put when you expect a stock to fall significantly. Works well as portfolio insurance against a bearish market. Best entered when IV is low and you have a clear catalyst (earnings, economic data, technical breakdown).
What is the maximum profit and loss for a Long Put?
Max profit: (Strike - Premium) × lot size (at underlying = 0). Max loss: Premium paid × lot size.
What is the breakeven price for a Long Put?
Breakeven: Strike price - Premium paid. US example: Buy 1 SPY $420 Put for $3.50. Max loss: $350. Breakeven: $416.50. Profit increases as SPY falls. Indian-index example: Buy 1 SENSEX 80000 Put for ₹250. Max loss: ₹5,000 (₹250 × 20). Breakeven: 79750. Profit increases as SENSEX falls below 79750.
What are common mistakes when trading a Long Put?
Common mistakes include: Buying puts during earnings without understanding IV crush; Choosing strikes too far OTM (low POP); Not scaling out as puts become profitable; Holding to expiration unnecessarily (exit early on profit).
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