Selling a NIFTY 23,600 Put Option (PE) at a premium of ₹87 can generate income if NIFTY remains above the strike price. However, put option selling involves significant risk, especially when the market falls sharply.
If you are considering an investment or margin requirement of around ₹1,25,000, it is important to understand exactly how the strategy makes money and how losses can occur.
What Does Selling a 23,600 PE at ₹87 Mean?
When you sell a NIFTY 23,600 PE at ₹87, you receive the option premium upfront.
The important figures are:
- Strike Price: 23,600
- Put Premium: ₹87
- Lot Size: 65
- Premium received per lot: ₹87 × 65 = ₹5,655
- Approximate margin: ₹1,25,000
- Expiry: Depends on the particular option contract
The seller benefits when NIFTY stays above the strike price, particularly above the breakeven level.
Option Trading in Indian Market: Strategies, Risks & Earning Guide
What Is the Breakeven Point?
The breakeven price for a short put is:
Breakeven = Strike Price − Premium Received
Therefore:
23,600 − ₹87 = 23,513
So the approximate expiry breakeven is NIFTY 23,513.
What happens at expiry?
| NIFTY at Expiry | 23,600 PE Intrinsic Value | Approx. Profit/Loss per Lot |
|---|---|---|
| 24,000 | ₹0 | +₹5,655 |
| 23,800 | ₹0 | +₹5,655 |
| 23,600 | ₹0 | +₹5,655 |
| 23,500 | ₹100 | -₹845 |
| 23,400 | ₹200 | -₹7,345 |
| 23,300 | ₹300 | -₹13,845 |
| 23,000 | ₹600 | -₹33,345 |
| 22,500 | ₹1,100 | -₹65,845 |
| 22,000 | ₹1,600 | -₹98,345 |
Calculations are before brokerage, taxes and other applicable charges.
How Does the Put Seller Make Money?
The maximum profit comes from the premium collected.
If you sell one lot at ₹87:
₹87 × 65 = ₹5,655
If NIFTY finishes above 23,600 at expiry, the 23,600 PE expires worthless and the seller keeps the entire ₹5,655 premium.
For example, if NIFTY expires at 24,000, the put has no intrinsic value.
Therefore:
Profit = ₹5,655 per lot
What If NIFTY Falls Below 23,600?
This is where the risk increases.
Suppose NIFTY expires at 23,400.
The put option has an intrinsic value of:
23,600 − 23,400 = 200 points
The seller received ₹87 but has to bear ₹200 of option value.
Net loss:
₹87 − ₹200 = -₹113 per point
For a 65-unit lot:
₹113 × 65 = ₹7,345 loss
Therefore, even though the seller received premium initially, a sufficiently large fall in NIFTY can turn the position into a significant loss.
Is ₹1,25,000 Investment Enough?
This needs to be understood carefully.
The ₹1,25,000 is generally margin/capital allocated to support the option position, not the maximum amount you can lose.
This is one of the biggest misconceptions about option selling.
If you have ₹1.25 lakh available and sell a naked put, a sharp fall in NIFTY can result in losses that consume a substantial portion of that capital.
Therefore, ₹1.25 lakh should not be considered the maximum risk merely because that is the amount used as margin.
Maximum Profit vs Potential Loss
For a naked short put:
Maximum profit = Premium received
In this example:
Maximum profit = ₹5,655 per lot
The downside, however, can be substantial if NIFTY declines sharply.
This creates an important risk-reward imbalance:
You are collecting a relatively small premium while accepting potentially much larger losses.
That is why option selling requires strict risk management.
What If NIFTY Remains Above 23,600?
This is the ideal scenario for the put seller.
For example:
NIFTY = 24,000
The 23,600 PE expires worthless.
Profit = ₹5,655 per lot
Similarly:
- NIFTY 23,800 → ₹5,655 profit
- NIFTY 23,700 → ₹5,655 profit
- NIFTY 23,600 → ₹5,655 profit
The seller receives the full premium as long as the option expires out-of-the-money.
What If NIFTY Moves Toward 23,600 Before Expiry?
The situation is different before expiry.
Even if NIFTY is currently above 23,600, the option premium can increase if:
- NIFTY falls
- Implied volatility increases
- Expiry approaches while the option is in-the-money
- Market sentiment becomes bearish
Therefore, being above 23,600 today does not guarantee a profit.
The option seller must consider both price movement and time remaining until expiry.
Time Decay Can Help the Seller
One advantage of selling options is theta decay.
As expiry approaches, the time value of an option generally decreases, assuming other factors remain reasonably stable.
For a put seller, this can work in their favour.
For example, a put sold at ₹87 might subsequently fall to:
₹70 → ₹50 → ₹30 → ₹10
The seller can potentially buy it back at a lower price and retain the difference.
For example:
Sell at ₹87
Buy back at:
₹30
Profit:
₹57 × 65 = ₹3,705 per lot
The trader does not necessarily have to wait until expiry.
What Is the Best Scenario for This Trade?
The most favourable scenario is:
NIFTY remains comfortably above 23,600 and volatility declines.
In that situation, the put premium can decrease quickly.
However, a sudden market crash can have the opposite effect.
Major Risk: Sharp Market Correction
Suppose NIFTY suddenly falls from above 24,000 toward 23,000.
The 23,600 PE can increase substantially in value.
The seller may then face a large mark-to-market loss and could receive a margin requirement increase from the broker/exchange.
This is why naked option selling should not be treated as a guaranteed monthly income strategy.
A Safer Alternative: Put Credit Spread
Instead of selling the 23,600 PE naked, a trader can consider a bull put spread.
For example:
- Sell 23,600 PE
- Buy a lower-strike PE
The purchased lower-strike put limits the maximum downside.
The disadvantage is that the premium received is lower, but the major benefit is defined risk.
For traders with limited capital, defined-risk strategies can be easier to manage than naked option selling.
Is Selling 23,600 PE at ₹87 Good or Bad?
There is no simple answer without considering the current NIFTY price, expiry, volatility and market trend.
Generally:
It may be favourable when:
- NIFTY is comfortably above 23,600
- Market trend is neutral to bullish
- Support around the strike is strong
- Implied volatility is relatively high
- You have sufficient margin
- You have a predetermined stop-loss
It can become dangerous when:
- NIFTY is close to 23,600
- The market is strongly bearish
- There is a major event or unexpected news
- Volatility is increasing rapidly
- You are using most of your available capital as margin
- There is no stop-loss or hedging strategy
Key Numbers at a Glance
Strike Price: 23,600
Premium: ₹87
Lot Size: 65
Premium Received: ₹5,655
Expiry Breakeven: 23,513
Maximum Profit: ₹5,655 per lot
Approximate Margin Considered: ₹1,25,000
Main Risk: Sharp decline in NIFTY
Conclusion
Selling the NIFTY 23,600 PE at ₹87 can be profitable if NIFTY stays above the strike and the option premium declines. The maximum profit for one 65-unit lot is approximately ₹5,655 before charges, while the expiry breakeven is approximately 23,513.
However, the ₹1.25 lakh margin should not be considered the maximum possible loss. A substantial fall in NIFTY can produce much larger losses, making naked put selling considerably riskier than simply buying an option.
For a trader with ₹1.25 lakh capital, the key question should not be “How much premium can I collect?” but rather “How much can I lose if NIFTY suddenly falls?”
Disclaimer: This article is published for educational and informational purposes only. It is not investment advice, a trading recommendation, or a solicitation to buy or sell any security or derivative. Options trading involves substantial risk and may result in significant losses. Readers should conduct their own research and consult a SEBI-registered investment adviser before making investment decisions.
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