LONG PUT: Options Trading Bearish Strategy

Long Put

Buying a Put is the opposite of buying a Call. When you buy a Call you are bullish about the stock / index. When an investor is bearish, he can buy a Put option. A Put Option gives the buyer of the Put a right to sell the stock (to the Put seller) at a pre-specified price and thereby limit his risk.

Market Scenario: Bearish

Risk: Limited (Premium Paid)

Reward: Unlimited

BEP: Call Strike - Premium

EXAMPLE:
Entry:

SPOT

5100

                       

	STRIKE	PREMIUM
SELL PUT	5000	50

BEP = 5000 - 50 = 4950

On Exit if:

SPOT	PUT PAY-OFF	PREMIUM PAID	STRATEGY PAY-OFF
4700	300	-50	250
4800	200	-50	150
4900	100	-50	50
4950	50	-50	0
5000	0	-50	-50
5100	0	-50	-50
5200	0	-50	-50
5300	0	-50	-50
5400	0	-50	-50

 

 Long Put - Strategy Pay-Off