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The put-based mirror of a Call Christmas Tree: a defined loss on one side, and genuinely unlimited risk on the other — here, on the downside instead of the upside.

Read the "How does it work" section below carefully before using this strategy — the unlimited-risk side is easy to overlook if you're expecting the same fully defined-risk shape a butterfly has.

A Put Christmas Tree buys one put at a high strike and sells one put each at two lower strikes — three strikes, but an uneven number of contracts: one bought, two sold. As with the call version, that imbalance (net short one put overall) is what leaves one side of the payoff genuinely unlimited.

Counting contracts: +1 (bought) − 1 − 1 (sold) = net −1, net short one put. Below the low strike, this behaves like a naked Short Put — large, and in the deep-downside extreme, unbounded within the usual "capped only at zero" sense a Short Put carries.

The zones mirror the call version, reflected to the downside:

1. At or above the high strike — maximum loss on this side, but fully capped and flat. A genuine defined-risk zone.
2. Between the high and mid strikes — loss shrinks as the underlying falls, crossing into profit at the upper breakeven.
3. Between the mid and low strikes (the profit plateau) — maximum profit, flat across the zone.
4. Below the low strike — profit shrinks, crosses into loss at the lower breakeven, and then keeps growing as the underlying keeps falling, all the way down toward the underlying reaching zero.

A Christmas Tree (Put) fits a neutral-to-moderately-bearish view where a trader is comfortable accepting large downside risk on a sharp fall, in exchange for a cheaper entry than a fully defined-risk Long Put Condor (which needs a fourth leg's premium to cap that same risk). Given the open-ended exposure, it's generally used with real conviction that a large fall is unlikely, or a plan to adjust the position if the underlying approaches the low strike.

Suppose Nifty is trading at 24,000 with a weekly expiry coming up, and lot size is 65. You expect it to settle between 23,700 and 24,000, and accept the risk of a bigger fall.

1. Confirm the setup, including the risk you're accepting. You expect Nifty near 23,700–24,000, and are comfortable with large downside risk if it falls much further.
2. Buy 1 put at the 24,300 strike for a premium of 320.
3. Sell 1 put at the 24,000 strike, collecting a premium of 140.
4. Sell 1 put at the 23,700 strike, collecting a premium of 58.
5. Calculate the net debit: 320 − 140 − 58 = 122 points, or ₹7,930 at this lot size — your maximum loss only on the upside.
6. Understand the plateau: between 23,700 and 24,000, maximum profit of ₹11,570.
7. Understand the uncapped side: below 23,522, losses grow as Nifty keeps falling, with no cap short of the underlying reaching zero.
8. See how it resolves at expiry:
   • Nifty finishes at or above 24,300 → capped loss of ₹7,930.
   • Nifty finishes between 23,700 and 24,000 → maximum profit of ₹11,570.
   • Nifty finishes well below 23,522, say at 22,500 → a large, growing loss.

Quick reference for the same trade:

Based on the worked example above. Notice the line flattens on the right (capped loss) but keeps sloping downward on the left with no floor — the mirror image of the Christmas Tree (Call)'s shape. Move the cursor over the chart to see profit/loss at any price.

• The downside risk is large and effectively unbounded within the usual sense that applies to any short put position — this bears repeating, since it's the single most important thing to understand before using this strategy.
• Margin requirements reflect that large downside risk and will be substantial, unlike a fully defined-risk Long Put Condor.
• Three separate legs mean higher execution cost than a two-leg spread.
• Index options on NSE are typically European-style and cash-settled — no early-assignment risk on the short legs before expiry.