{"id":12235,"date":"2026-05-22T13:39:13","date_gmt":"2026-05-22T13:39:13","guid":{"rendered":"https:\/\/lemonn.co.in\/blog\/glossary\/put-option\/"},"modified":"2026-05-22T13:39:13","modified_gmt":"2026-05-22T13:39:13","slug":"put-option","status":"publish","type":"glossary","link":"https:\/\/lemonn.co.in\/blog\/glossary\/put-option\/","title":{"rendered":"Put Option"},"content":{"rendered":"<p>A <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/put-option\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">Put Option<\/a> is a financial contract that gives the buyer the right &#x2014; but not the obligation &#x2014; to sell an underlying asset at a predetermined <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/strike-price\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">strike price<\/a> on or before the expiry date. The buyer pays an upfront <a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/premium\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>premium<\/a> for this right. Indian traders use <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/put-options\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">put options<\/a> to take <a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/bearish\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>bearish<\/a> positions on <a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/nifty\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>Nifty<\/a>, Bank Nifty and <a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/stocks\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>stocks<\/a>, or to hedge existing long <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/portfolio\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">portfolio<\/a>s against downside risk.<\/p>\n<div><strong>Key takeaways:<\/strong>\n<ul>\n<li>A put gives the buyer the right to sell at the strike price by expiry.<\/li>\n<li>Maximum loss for the buyer is the premium paid; maximum profit is strike &#x2212; 0 (limited but large).<\/li>\n<li>Used to bet on falling prices or to insure a long portfolio.<\/li>\n<li>Premium rises with time to expiry, <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/volatility\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">volatility<\/a>, and underlying weakness.<\/li>\n<li>Indian puts can be cash-settled (<a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/index\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>index<\/a>) or physically settled (stocks).<\/li>\n<\/ul>\n<\/div>\n<h2 id=\"example-of-a-put-trade\">Example of a put trade<\/h2>\n<p>Nifty is at 22,000 and you expect it to fall sharply on a possible US Fed surprise. You buy the 22,000-strike Nifty put expiring in two weeks at a premium of &#8377;130. <a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/lot-size\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>Lot size<\/a> is 25, so your total cost is &#8377;3,250. If Nifty drops to 21,500 by expiry, your put is worth at least &#8377;500. You earn (&#8377;500 &minus; &#8377;130) &times; 25 = &#8377;9,250. If Nifty stays above 22,000, the put expires worthless.<\/p>\n<h2 id=\"key-components\">Key components<\/h2>\n<ul>\n<li><strong>Underlying:<\/strong> Index, stock, currency or <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/commodity\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">commodity<\/a>.<\/li>\n<li><strong>Strike price:<\/strong> The price at which the holder may sell.<\/li>\n<li><strong>Expiry:<\/strong> Date by which the right must be exercised.<\/li>\n<li><strong>Premium:<\/strong> Cost of buying the right.<\/li>\n<li><strong>Lot size:<\/strong> Quantity per contract.<\/li>\n<\/ul>\n<h2 id=\"when-puts-are-valuable\">When puts are valuable<\/h2>\n<ul>\n<li><strong>Directional bearish bet:<\/strong> Profit from a fall without selling the underlying.<\/li>\n<li><strong>Portfolio hedge:<\/strong> Buy index puts to protect a long <a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/equity\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>equity<\/a> portfolio.<\/li>\n<li><strong>Event hedge:<\/strong> Insure against earnings or macro surprises.<\/li>\n<li><strong>Volatility plays:<\/strong> Buy puts when <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/implied-volatility\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">implied volatility<\/a> is low and expected to rise.<\/li>\n<\/ul>\n<h2 id=\"in-at-out-of-the-money-for-puts\">In\/At\/Out of the money for puts<\/h2>\n<table>\n<tr>\n<th>Spot vs strike<\/th>\n<th>Status<\/th>\n<th>Implication<\/th>\n<\/tr>\n<tr>\n<td>Spot &lt; Strike<\/td>\n<td>ITM<\/td>\n<td><a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/intrinsic-value\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">Intrinsic value<\/a> present<\/td>\n<\/tr>\n<tr>\n<td>Spot &#x2248; Strike<\/td>\n<td>ATM<\/td>\n<td>Highest time value<\/td>\n<\/tr>\n<tr>\n<td>Spot &gt; Strike<\/td>\n<td>OTM<\/td>\n<td>Only time value<\/td>\n<\/tr>\n<\/table>\n<h2 id=\"risks-for-put-buyers\">Risks for put buyers<\/h2>\n<p>As with calls, time decay erodes the put&#x2019;s value over time. Implied volatility crush after a known event (earnings, RBI policy) can reduce premium even if direction is right. Defined-risk spread strategies &#x2014; like bear put spreads &#x2014; help manage these costs.<\/p>\n<h2 id=\"indian-market-specifics\">Indian-market specifics<\/h2>\n<p>Index puts are popular weekly trades. Bank Nifty and Nifty options dominate <a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/volume\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>volume<\/a>s. <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/stock-options\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">Stock options<\/a> are physically settled at expiry &mdash; be ready to deliver <a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/shares\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>shares<\/a> if your put expires ITM. Sellers of puts face large margin requirements; SPAN takes into account potential losses.<\/p>\n<h2 id=\"frequently-asked-questions\">Frequently asked questions<\/h2>\n<div>\n<h3 id=\"can-i-exercise-a-put-option-before-expiry-in-india\">Can I exercise a put option before expiry in India?<\/h3>\n<p>No. Indian listed options are European-style &#x2014; exercise only at expiry.<\/p>\n<h3 id=\"why-might-a-put-lose-value-even-if-prices-fall\">Why might a put lose value even if prices fall?<\/h3>\n<p>Time decay and falling implied volatility can offset directional gains. Plan trades around event timing.<\/p>\n<h3 id=\"what-is-a-protective-put\">What is a <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/protective-put\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">protective put<\/a>?<\/h3>\n<p>Buying a put on a stock or portfolio you already own to limit downside risk.<\/p>\n<h3 id=\"how-does-lemonn-handle-option-settlement\">How does Lemonn handle option settlement?<\/h3>\n<p>Indices are cash-settled into your account; stock options that end ITM trigger physical delivery &#x2014; you must have shares (for short positions) or be ready to take delivery (for long positions).<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>A Put Option is a financial contract that gives the buyer the right &#x2014; but not the obligation &#x2014; to sell an underlying asset at a predetermined strike price on or before the expiry date. The buyer pays an upfront premium for this right. Indian traders use put options to take bearish positions on Nifty, [&#x2026;]<\/p>\n","protected":false},"author":3,"featured_media":0,"menu_order":0,"template":"","meta":{"_uag_custom_page_level_css":"","footnotes":""},"class_list":["post-12235","glossary","type-glossary","status-publish","hentry"],"blocksy_meta":[],"uagb_featured_image_src":{"full":false,"thumbnail":false,"medium":false,"medium_large":false,"large":false,"1536x1536":false,"2048x2048":false,"web-stories-poster-portrait":false,"web-stories-publisher-logo":false,"web-stories-thumbnail":false},"uagb_author_info":{"display_name":"Ashutosh","author_link":"https:\/\/lemonn.co.in\/blog\/author\/ashu\/"},"uagb_comment_info":0,"uagb_excerpt":"A Put Option is a financial contract that gives the buyer the right &#x2014; but not the obligation &#x2014; to sell an underlying asset at a predetermined strike price on or before the expiry date. The buyer pays an upfront premium for this right. Indian traders use put options to take bearish positions on Nifty,&hellip;","_links":{"self":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/12235","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary"}],"about":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/types\/glossary"}],"author":[{"embeddable":true,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/users\/3"}],"version-history":[{"count":0,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/12235\/revisions"}],"wp:attachment":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/media?parent=12235"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}