Put Options
Selling a Put Option Example: Breakeven, Profit, and Loss
A put-selling example shows how limited premium can sit beside meaningful downside risk.
Options trading involves significant risk. The examples here are educational and are not recommendations to buy or sell any security or derivative contract.
The best examples show the ugly rows in the payoff table. That is where a new trader learns the real risk.
Start with the key takeaways, then look at the example table. Do not rush to the setup name. In option selling, the real test is what happens when the trade is wrong: margin, volatility, liquidity, and the exit rule matter more than the premium shown on screen.
Key takeaways
- A put seller wants price to stay above the strike.
- Breakeven is strike minus premium.
- Loss can become large in a sharp fall.
- Cash-secured puts need capital discipline.
- A put spread can define maximum loss.
Example setup
Assume a trader sells a 95 put for 2 while the stock trades near 100.
The seller receives 2 upfront. The breakeven is 93 before costs.
Expiry payoff table
Here is how the trade behaves at expiry.
| Price at expiry | Put value | Seller result |
|---|---|---|
| 105 | 0 | +2 |
| 95 | 0 | +2 |
| 93 | 2 | Breakeven |
| 90 | 5 | -3 |
| 80 | 15 | -13 |
| 60 | 35 | -33 |
The downside rows matter more than the premium row.
What the seller wants
The seller wants the market to stay above the strike or not fall below breakeven. Time decay helps when price remains controlled.
If price falls quickly, time decay becomes less important than delta, volatility, and exit discipline.
What changes in India
With NIFTY or BANKNIFTY options, the same payoff idea applies in points. The final rupee result depends on lot size and costs.
Index option settlement is different from stock assignment, but traders still need margin and loss limits.
How to practice
Paper trade the example by changing the strike, premium, and expiry. Watch how the breakeven moves and how quickly loss expands in a selloff.
This builds better judgment than memorizing that put selling is a bullish strategy.
Next guides to read
Option selling topics connect through obligation, payoff, margin, volatility, and exit rules. Continue with these related guides before moving from learning to live trades.
Frequently asked questions
How do you calculate profit selling a put?
Premium received minus any intrinsic value paid back, before costs.
What is the maximum loss selling a put?
For a stock, loss can be very large if the stock falls sharply; a spread can define the loss.
What is a good put selling example for beginners?
Use small round numbers and calculate breakeven and loss at several expiry prices.
Does selling a put guarantee income?
No. Premium is not guaranteed income because losses can exceed it.