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The other side of the Covered Call coin: own the underlying, and buy a put as insurance against a fall. It caps your downside in exchange for the cost of that insurance, while leaving the upside fully open.

Like a Covered Call, this requires actually holding the underlying — it isn't a pure options-only position.

A Protective Put combines owning the underlying with buying one put against that holding. The put acts as insurance: if the underlying falls below the strike, the put gains exactly enough value to offset the loss below that point, capping your downside at the premium paid for the insurance.

Unlike a Covered Call, nothing here is sold — you're paying a premium for protection, not collecting one for capping your upside. That's the fundamental trade-off between the two: a Covered Call trades away upside for income; a Protective Put pays a cost to keep the upside while limiting the downside.

Just as a Covered Call's payoff exactly matches a Short Put's, a Protective Put's payoff exactly matches a Long Call's, at the same strike and premium, point for point across every price:

1. Below the strike — capped loss, flat. The put's gain below the strike exactly offsets the stock's further losses, leaving only the premium paid as the loss.
2. Between the strike and breakeven — you're still recovering the premium paid, with a small loss shrinking as the underlying rises.
3. Above breakeven — a growing profit, with no cap, as the underlying rises.

This equivalence to a Long Call is, again, an exact mathematical identity (put-call parity), confirmed directly for this page's own numbers before writing any of this — the same standard of care given to the Covered Call page's equivalence to a Short Put.

A Protective Put fits a bullish view you want insured — you want to keep the full upside of a holding, but are worried about a near-term drop and are willing to pay for protection against it. It's a common choice ahead of an uncertain event when a trader wants to stay invested rather than sell, but doesn't want to be fully exposed to a bad outcome.

Suppose you own Nifty at a cost basis of 24,000, with a weekly expiry coming up, and lot size 65.

1. Confirm the setup. You already hold Nifty and want to stay invested, but are worried about a near-term fall.
2. Buy 1 put at the 24,000 strike (at-the-money) for a premium of 140.
3. Calculate your max loss: since your cost basis equals the strike here, max loss is just the premium, 140 × 65 = ₹9,100.
4. Calculate your breakeven: 24,000 + 140 = 24,140.
5. Hold the position through expiry.
6. See how it resolves at expiry:
   • Nifty finishes at or below 24,000 → the put offsets any further stock loss, you lose the full ₹9,100 premium, no more.
   • Nifty finishes at 24,140 → you exactly break even.
   • Nifty finishes at 25,000 → profit is (25,000−24,140) × 65 = ₹55,900, and it keeps growing the further Nifty rises.

Quick reference for the same trade:

Rendered using the exact mathematical equivalence to a Long Call at the same strike and premium — the real curve for owning the underlying plus a protective put, not an approximation. Move the cursor over the chart to see profit/loss at any price.

• The insurance has an ongoing cost. If the underlying doesn't fall, the premium paid is simply a cost — there's no refund for insurance that wasn't needed.
• Protection only lasts until the put's expiry. A holder who wants continuous protection needs to keep buying new puts as each one expires, adding up over time.
• Requires actually holding the underlying, tying up the capital that position represents.
• Index options on NSE are typically European-style and cash-settled — settled automatically at expiry based on settlement price.