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Married Put Option Strategy-Bullish Strategy

Married-Put-Option-Strategy

Options Trading Strategies: Bullish - Married Put Option Strategy

This strategy is used by investors/traders who want to go long on the underlying security while also benefiting from various company actions associated with the security such as dividends, bonuses, and so on. The trader is optimistic on the underlying, but is worried about unknown, near-term downside risks to the market. The Married put option strategy is used to protect position from downside risks by buying puts along with underlying security.

Risk:

Maximum risk will occur if the security price at expiry closes at the long ATM put.

Reward:

Reward on the security holding is theoretically limitless with added gains in form of dividends, bonus issues, etc.

Construction

Buy 1 Nifty 50 Futures

Buy 1 ATM Put Option

Payoff Chart
Option Type Expiry Date Strike Price LTP Action No. Of Lots
FUTURES 29/03/2023 -NA- 17100 Buy 1
PUT 29/03/2023 17100.0 174.25 Buy 1

 

 

Market Expiry Payoff 1 Payoff 2 Net Premium Option PayOffAt Expiry
16700.0 -422.6 400.0 -174.25 -196.85
16750.0 -372.6 350.0 -174.25 -196.85
16800.0 -322.6 300.0 -174.25 -196.85
16850.0 -272.6 250.0 -174.25 -196.85
16900.0 -222.6 200.0 -174.25 -196.85
16950.0 -172.6 150.0 -174.25 -196.85
17000.0 -122.6 100.0 -174.25 -196.85
17050.0 -72.6 50.0 -174.25 -196.85
17100.0 -22.6 0.0 -174.25 -196.85
17150.0 27.4 0.0 -174.25 -146.85
17200.0 77.4 0.0 -174.25 -96.85
17250.0 127.4 0.0 -174.25 -46.85
17300.0 177.4 0.0 -174.25 3.15
17350.0 227.4 0.0 -174.25 53.15
17400.0 277.4 0.0 -174.25 103.15
17450.0 327.4 0.0 -174.25 153.15
17500.0 377.4 0.0 -174.25 203.15

 

Married Put Option Trading Example

Assume the Nifty 50 is currently trading at Rs. 17100 and the investor/trader is bullish on the market. He purchased one Nifty 50 futures contract. To minimize the risk and protect himself from this negative move, he will purchase one 17100 at the money Put Option at a premium of Rs. 174.

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    Scenario 1:

     At expiry if Nifty 50 closes at Rs. 16900, then the trader will make a loss of Rs. 13050. [{(16900-17100) + (300-174)} *75]

    Scenario 2:

    At expiry if Nifty closes at Rs. 17400, then the trader will make a profit of Rs. 9450. [{(17400-17100) – (174)} *75]

    Also read: Bull Calendar Spread Option Strategy

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