![Long Put](/_next/image?url=https%3A%2F%2Fcdn.sanity.io%2Fimages%2F46f2xaz7%2Fproduction%2F0de73b57323f7d3d2eb98da84039c7f2b45971a9-2260x1415.png%3Fauto%3Dformat&w=3840&q=75)
Long Put
Long Put option is the most basic & simplest strategy. It is recommended or implemented when we expect the underlying asset to show significant downside move.
A long put is a basic options trading strategy where a trader purchases a put option, believing that the price of the underlying asset will decline before the option's expiration date. Buying a put option gives the trader the right, but not the obligation, to sell the underlying asset at the strike price until the expiration.
![11058a9961b0](/_next/image?url=https%3A%2F%2Fcdn.sanity.io%2Fimages%2F46f2xaz7%2Fproduction%2Fd073bc8f52d39f4ebc324b1e5df441405e7ff078-1208x705.png%3Fauto%3Dformat&w=3840&q=75)
How It Works:
1. Buy a Put Option: The trader purchases a put option at a specific strike price, paying the required premium.
Potential Profit and Loss:
- Maximum Profit: The profit potential is substantial, with the upper limit being the strike price minus the premium paid (assuming the underlying asset could drop to $0).
- Maximum Loss: Limited to the premium paid for the put option.
Benefits:
- Profit from Declining Prices: Offers a way to benefit from a decrease in the price of the underlying asset.
- Defined Risk: The maximum possible loss is the premium paid, making it a defined risk strategy.
- Leverage: Allows a trader to potentially benefit from price declines without having to short the actual stock, often with less capital outlay.
Drawbacks:
- Time Decay: As expiration approaches, the option's time value decreases, which can erode potential profits if the underlying asset's price doesn't move as expected.
- Upfront Cost: The trader must pay the premium upfront, which is lost if the option expires worthless.
Example:
Imagine stock NIFTY is trading at ₹20000:
1. Buy a ₹19950 put option with a premium of ₹56.45.
If NIFTY drops to ₹19850 by expiration, the trader could exercise the option, selling NIFTY for ₹19850, leading to a profit of ₹43.55 (₹100 intrinsic value - ₹56.45 premium). However, if NIFTY remains above ₹19950 at expiration, the option expires worthless, and the trader's loss is the ₹56.45 premium paid.
In conclusion, a long put is a straightforward strategy favored by traders expecting a decline in an asset's price. It provides the potential for significant profit with a defined maximum risk (the premium paid).
Other Strategies
![Iron Condor](/_next/image?url=https%3A%2F%2Fcdn.sanity.io%2Fimages%2F46f2xaz7%2Fproduction%2F12f10eb735cdea0ecba98f1d77c0b031ad18adf1-2260x1416.png%3Fauto%3Dformat&w=3840&q=75)
Iron Condor
A strategy designed to profit from low volatility in the underlying asset, combining a bullish put credit spread and a bearish call credit spread to it.
![Iron Butterfly](/_next/image?url=https%3A%2F%2Fcdn.sanity.io%2Fimages%2F46f2xaz7%2Fproduction%2F0dd405c00798bdb2684427ef7c80c7902b256506-2260x1415.png%3Fauto%3Dformat&w=3840&q=75)
Iron Butterfly
This is a strategy which profits from low volatility in the price of the underlying asset while minimizing risk.
![Short Strangle](/_next/image?url=https%3A%2F%2Fcdn.sanity.io%2Fimages%2F46f2xaz7%2Fproduction%2F5bf370677340b35f7876439c3af0ca3f42154391-2260x1415.png%3Fauto%3Dformat&w=3840&q=75)
Short Strangle
A short strangle is a non directional trading strategy where an investor sells an (OTM) call option and put option on the same underlying asset simultaneously.
![Short Straddle](/_next/image?url=https%3A%2F%2Fcdn.sanity.io%2Fimages%2F46f2xaz7%2Fproduction%2Fe0f615447ac901bcb563925b118242b0c327e757-2260x1415.png%3Fauto%3Dformat&w=3840&q=75)
Short Straddle
A Short straddle is considered neutral or non-directional because it profits from minimal price movement in the underlying asset.
![Put Ratio Backspread](/_next/image?url=https%3A%2F%2Fcdn.sanity.io%2Fimages%2F46f2xaz7%2Fproduction%2F35a902f089de4d28cb2b39c119f55cd041901f66-2260x1415.png%3Fauto%3Dformat&w=3840&q=75)
Put Ratio Backspread
The Put Ratio Backspread strategy involves selling and buying put options in a specific ratio.
![Bear Call Spread](/_next/image?url=https%3A%2F%2Fcdn.sanity.io%2Fimages%2F46f2xaz7%2Fproduction%2F02f788314292fe0bfaa65f78e65b76c18898fca4-2260x1415.png%3Fauto%3Dformat&w=3840&q=75)
Bear Call Spread
A Bear Call Spread is an options trading strategy that's used when a trader believes the price of an underlying asset will go down, but not significantly.
![Bear Put Spread](/_next/image?url=https%3A%2F%2Fcdn.sanity.io%2Fimages%2F46f2xaz7%2Fproduction%2F9da99c931c0384384512dd043530366d5102aaf1-2260x1415.png%3Fauto%3Dformat&w=3840&q=75)
Bear Put Spread
A Bear Put Spread is a type of vertical spread strategy used in options trading.
![Long Put](/_next/image?url=https%3A%2F%2Fcdn.sanity.io%2Fimages%2F46f2xaz7%2Fproduction%2F0de73b57323f7d3d2eb98da84039c7f2b45971a9-2260x1415.png%3Fauto%3Dformat&w=3840&q=75)
Long Put
Long Put option is the most basic & simplest strategy. It is recommended or implemented when we expect the underlying asset to show significant downside move.
![Short Call](/_next/image?url=https%3A%2F%2Fcdn.sanity.io%2Fimages%2F46f2xaz7%2Fproduction%2Feb07a5d1ad0a1e1d0be62b02e298bab98d279638-2260x1415.png%3Fauto%3Dformat&w=3840&q=75)
Short Call
Short Call strategy is employed in a bearish or neutral market outlook, where the underlying asset's price is expected to remain stable or fall.
![Call Ratio Backspread](/_next/image?url=https%3A%2F%2Fcdn.sanity.io%2Fimages%2F46f2xaz7%2Fproduction%2Feeadc316edb11d3524e82145279f0fb466ef39fd-2260x1415.png%3Fauto%3Dformat&w=3840&q=75)
Call Ratio Backspread
The Call Ratio Backspread strategy involves selling and buying call options in a specific ratio.
![Bull Put Spread](/_next/image?url=https%3A%2F%2Fcdn.sanity.io%2Fimages%2F46f2xaz7%2Fproduction%2F9743b7b35c7710fd4431bcc9dcf0dce422a50240-2260x1415.png%3Fauto%3Dformat&w=3840&q=75)
Bull Put Spread
A Bull Put Spread is a type of vertical spread strategy used in options trading
![Bull Call Spread](/_next/image?url=https%3A%2F%2Fcdn.sanity.io%2Fimages%2F46f2xaz7%2Fproduction%2F38bf8dd75f037f531c7372db168ab3196940bb58-2260x1415.png%3Fauto%3Dformat&w=3840&q=75)
Bull Call Spread
A Bull Call Spread is an options trading strategy that's used when a trader believes the price of an underlying asset will go up, but not significantly.
![Short Put](/_next/image?url=https%3A%2F%2Fcdn.sanity.io%2Fimages%2F46f2xaz7%2Fproduction%2F0bec9cbb2091c514f837bfa744f628fd00931ff7-2260x1415.png%3Fauto%3Dformat&w=3840&q=75)
Short Put
Short Put strategy is employed in a bullish or neutral market outlook, where the investor believes that the underlying asset's price will remain stable or rise.
![Long Call](/_next/image?url=https%3A%2F%2Fcdn.sanity.io%2Fimages%2F46f2xaz7%2Fproduction%2F9a6af45e1a4744061f846f8f00f00b0f97f34972-2260x1415.png%3Fauto%3Dformat&w=3840&q=75)
Long Call
Long Call option' is the most basic & simplest strategy. It is recommended or implemented when we expect the underlying asset to show significant upside move.