Outlook: Insurance on holdings. Taught in full in Lesson 8, Hedging: insurance for your stocks. This page is the reference card.
Illustration, not a recommendation. The strikes and premiums on this page are fixed teaching figures, not live quotes, and no strategy suits every account or every market. Read the full disclaimer.
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What you must believe
You want to keep your holdings but cap the damage a crash can do. This is not a market view; it is a decision that a known premium is a fair price for an unknown disaster.
Construction
Hold ₹16.25L of index exposure (65 units at 25,000) and buy the 24,800 PE at ₹90. Insurance cost ₹5,850 for the week.
The numbers, before entry
Max loss: about ₹18,850, however deep the crash (200-point gap to the strike + the premium)
Max profit: open upside, permanently ₹5,850 lighter
Margin: none for the put; the holding is the holding
Greeks profile
The put's −delta partially offsets the holding, growing to a full offset below the strike: that is the floor. Short theta: insurance premium melts if the disaster stays away, which is the correct outcome.
Realistic expectations
This strategy is judged like insurance, not like a trade: most weeks it "loses" the premium and that is success. The honest question is cost drag: rolling weekly protection forever is expensive, so most professionals insure selectively, around known risk windows, or accept deductibles (further OTM strikes).
Management rules
Buy protection when IV rank is low; umbrellas are cheapest before the clouds
Choose the strike like a deductible: closer costs more and protects more
After a crash, the put is a profit centre: roll it down or cash it, deliberately
With other strategies
Add a covered call on top and it becomes a collar: the 25,200 CE at ₹55 pays most of the ₹90 insurance bill, in exchange for capping the upside. Cheap sleep, both directions
The bear put spread is its budget cousin: capped protection for a smaller premium when full-floor insurance feels rich
Skew reading (Lesson 19) times the purchase: flat skew in calm markets is the sale rack for exactly this strategy
Against a wheel position (Lessons 20 and 21), a far protective put converts open stock risk into a defined band while the income legs keep paying
Common mistakes
Buying protection only after the crash, at triple the IV
Insuring 100% of the portfolio 100% of the time and wondering where returns went
Letting the hedge become a bet: rolling puts down aggressively to chase the fall