Put option
The right, but not the duty, to sell an index or share at a set price on or before expiry. Investors buy puts as insurance.
A put gains value when the price falls below the strike. The buyer pays a premium, and that is the most they can lose. This makes puts a kind of insurance: a fund manager holding a large portfolio can buy index puts before a risky event, and their gains offset part of the fall if it comes.
Your break-even at expiry is the strike minus the premium. Like every option, a put loses a little value each day the expected move fails to arrive.
Example
With the Nifty at 25,000 you buy a 24,800 put for 80 points. One lot of 65 costs 5,200 rupees and your break-even is 24,720. If the Nifty falls to 24,400, the put is worth 400 points, or 26,000 rupees.
Watch out
Insurance has a cost. Buying puts every week to protect a portfolio can eat a large part of its return in a calm year.
Learn it properly in
Chapter 1.1: Futures and options in India: how F&O actually works, and why nine in ten retail traders lose