Learn protective put

5.4.2 · Stock-Market › Options Strategies

Protective put KYA hota hai?

WHY yeh insurance jaisa laagta hai?

• Aap upfront ek chhota sa premium $P$ dete ho (bilkul insurance premium ki tarah).
• Agar disaster aaye (stock crash kare), toh put "pay out" karta hai aur $K$ se neeche ka loss cover karta hai.
• Agar kuch bura na ho (stock badhe), toh put worthless expire ho jaata hai — aapne sirf premium "gawaya", bilkul usi tarah jaise ek insurance policy jise aapne kabhi claim nahi kiya.

Payoff kaise build karein — scratch se derive karo

Maano:

• $S_0$ = stock ke liye aapne jo price di (entry price)
• $S_T$ = expiry par stock price
• $K$ = put ka strike price
• $P$ = put ke liye diya gaya premium

Step 1 — Expiry par long stock ka payoff. Aapne $S_0$ par kharida, ab iska worth $S_T$ hai: $\text{Stock P/L}=S_T-S_0$ Yeh step kyun? Ek share par profit sirf "abhi kitna worth hai minus kitna diya tha" hai.

Step 2 — Expiry par long put ka payoff. Put aapko $K$ par bechne deta hai. Aap tabhi exercise karte ho jab $S_T<K$ ho (market low hone par unchaa bechna): $\text{Put value at expiry}=\max (K-S_T,0)$ Yeh step kyun? Agar $S_T\ge K$ ho toh aap open market mein bech doge, toh put worthless hai. Agar $S_T<K$ ho toh aapko $K-S_T$ ka faayda milta hai.

Step 3 — Diya gaya premium minus karo. $\text{Put P/L}=\max (K-S_T,0)-P$ Yeh step kyun? Aapne put kharidne ke liye $P$ kharch kiya; yeh outcome chahe kuch bhi ho, ek sunk cost hai.

Step 4 — Dono legs jodon. $\boxed{\Pi =(S_T-S_0)+\max (K-S_T,0)-P}$

Step 5 — Shape dekhne ke liye dono regimes mein split karo.

Case A: Stock strike se neeche jaaye ($S_T<K$). Yahaan $\max (K-S_T,0)=K-S_T$: $\Pi =(S_T-S_0)+(K-S_T)-P=K-S_0-P$ Dekho $S_T$ cancel ho jaata hai — chahe stock kitni bhi neeche jaaye, loss constant rehta hai. Yahi tumhara floor hai.

Case B: Stock strike se upar jaaye ($S_T\ge K$). Yahaan put worthless hai: $\Pi =S_T-S_0-P$ Yeh stock ke saath 1-for-1 badhta hai — unlimited upside (minus premium ka drag).

Break-even derive karna: Case B mein $\Pi =0$ set karo: $S_T-S_0-P=0\Rightarrow S_T=S_0+P$. ✔

Worked Examples

Common Mistakes

Active Recall

Flashcards

Connections

• Covered Call — mirror-image strategy (long ki jagah short option).
• Long Put — akela bearish option jo protective leg banata hai.
• Put-Call Parity — dikhata hai ki protective put ka payoff long call plus cash (synthetic call) ke barabar hai.
• Options Greeks — put negative delta aur positive vega add karta hai, net directional risk kam karta hai.
• Married Put — bilkul wahi strategy jab put stock ke saath hi kharida jaaye.
• Hedging Basics — protective put ek long equity position ke liye classic hedge hai.

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