Selling (writing) a put option
Get paid to bet the market won't fall much. Be the insurance company.
You're the insurer now
If buying a put is buying insurance, selling a put is running the insurance company. You collect premiums from many people. Most policies never pay out, so you keep the money. But when disaster strikes, you pay — and it can be a lot.
The put seller's view: "NIFTY will not fall much below 22,400 by expiry." They're happy if NIFTY rises, stays flat, or dips only a little.
The mirror of the put buyer
| NIFTY at expiry | Put buyer (1 lot) | Put seller (1 lot) |
|---|---|---|
| 22,800 | −₹9,425 | +₹9,425 |
| 22,400 | −₹9,425 | +₹9,425 |
| 22,300 | −₹2,925 | +₹2,925 |
| 22,255 | ₹0 | ₹0 |
| 22,100 | +₹10,075 | −₹10,075 |
| 21,800 | +₹29,575 | −₹29,575 |
If NIFTY ends at 22,400, you make ₹9,425.
Why sell puts?
1. You're bullish or neutral. You collect money if the market just goes sideways or up. Compare that with buying a call, which needs a real move up to make money.
2. You'd happily buy lower anyway. With stock options this has a neat twist. Say you'd like to own a stock at ₹1,400 but it trades at ₹1,480. Selling the 1,400 put pays you a premium today. If the stock stays above 1,400, you keep the premium. If it falls below, you end up buying the shares (stock options are ) — at the price you wanted, minus the premium you already pocketed.
Quick check
Which market outcome does a put seller like LEAST?