An options-based strategy well-suited for NSE F&O markets. Leverages the unique characteristics of NIFTY and BANK NIFTY weekly options including time decay, volatility cycles, and expiry behaviour.
Complexity
Beginner
Easy to implement
NSE Suitability
High
5.2 / 10 score
Timeframe
Daily
Short to medium term
Best For
Beginner Traders
5–15 days moves
Indicators Used
1
Options Chain
Win Rate (Backtest)
57.1%
Above 50% threshold
Avg Return / Trade
+0.52%
Per trade, after costs
Max Drawdown
-2.4%
Within typical range
Trades / Year
7
Small sample — interpret with caution
About the Protective Put Strategy
A protective put is an insurance strategy where you own shares while simultaneously buying put options on the same stock. This combination caps your downside risk at a predetermined price while preserving unlimited upside potential. The strategy captures the reality that equity holdings experience drawdowns, and it quantifies the cost of protection against sharp reversals.
On NSE, protective puts work well with liquid large-cap stocks where options chains are sufficiently deep to find reasonable strike prices and premiums. NSE's volatile market environment, particularly during earnings seasons and macro events, makes this strategy relevant for traders holding positions through uncertain periods. The strategy suits daily timeframes because put premiums decay predictably, and NSE's market hours allow you to adjust positions as price action evolves.
The typical setup involves identifying a stock you own or plan to buy, then locating puts in the options chain at a strike price representing your acceptable loss level. You compare the put premium against your risk tolerance and time horizon. The further out-of-the-money the put, the cheaper the protection but the larger potential loss. The setup succeeds when price action remains stable or rises, making the put expire worthless while your shares appreciate.
Who This Strategy Is For
This Beginner strategy suits Beginner Traders comfortable with a Daily timeframe and holding periods around several days. It's built for the Equity segment on NSE, so it fits traders who can check positions without needing intraday execution speed. Because it uses a small, well-known set of indicators, it's a reasonable starting point if you're new to systematic NSE trading.
Equity Curve (Backtest)
HIGH QUALITY
Tested on: VEDL
· 2024-05-13 to 2026-06-30
Total Return
+3.6%
CAGR
1.9%
Sharpe Ratio
0.79
Sortino Ratio
1.19
Calmar Ratio
0.79
Win Rate
57.1%
NSE Market Fit
5OUT OF 10
Moderate Fit
This strategy is well-suited for current NSE market conditions.
Win rate quality Excellent
Risk-adjusted return Excellent
Drawdown control Excellent
Trade frequency (sample size) Needs Caution
Sharpe ratio Good
Monthly Returns Heatmap
2024
2025
Jan
—
—
Feb
—
—
Mar
—
—
Apr
—
—
May
—
—
Jun
—
+0.6%
Jul
—
-0.4%
Aug
—
-1%
Sep
+0.9%
—
Oct
—
+1.8%
Nov
—
—
Dec
+1.7%
—
Positive return Negative return
Performance vs Nifty 50
Nifty 50 comparison isn't available for this backtest period yet.
Identify the market context — determine if conditions are trending or ranging, and confirm the higher timeframe direction
2
Wait for the specific entry signal defined by the strategy rules — do not enter without full confirmation
3
Execute with pre-defined stop loss and target — manage the trade according to the exit rules without discretionary override
Entry & Exit Rules
Risk Management Rules
Risk Per Trade
1.0%
of total capital
Min Capital
₹30,000
Hold Period
5–15 days
Segment
Equity, Futures
Common Mistakes to Avoid
⚠️ As with any systematic strategy, the most common mistake is deviating from the defined entry/exit rules mid-trade based on emotion rather than the backtested logic.
Full Backtest Report
Backtested on VEDL ·
2024-05-13 to 2026-06-30 ·
Capital ₹100,000
Equity Curve
Live tracking coming soon
We're building forward-tested, paper-trade tracking for this strategy so you can see how it performs
on live NSE data — not just historical backtests. Check back soon.
No sample trades added yet for this strategy.
Strategy Parameters
The exact rules and default values this strategy uses — adjust them when you run a full backtest.
Parameter
Default
Min
Max
Type
Description
put_delta
0.25
0.10
0.50
decimal
Delta of put to buy as protection
expiry_days
30
7
90
integer
Days to expiration of protective put
cost_threshold
2.0
0.5
5.0
decimal
Maximum put premium as % of stock price
roll_dte
7
3
14
integer
Days to expiry to roll protective put forward
Frequently Asked Questions
A Protective Put buys put options against an existing stock holding, limiting downside loss to the strike price minus premium paid while maintaining unlimited upside potential. It functions as insurance for your NSE stock portfolio, most valuable before uncertain events (elections, earnings, budget) when downside risk is elevated.
Choose a put strike representing your maximum acceptable loss level — if you own Reliance at ₹2,800 and can tolerate a 10% loss (₹280), buy the ₹2,520 put as protection. Higher strikes (closer to current price) cost more premium but provide more immediate protection, while lower strikes are cheaper but allow larger losses before activating.
Calculate put premium as an annualized percentage of stock value for cost comparison. A ₹100 put on a ₹2,800 stock expiring in 30 days costs approximately 3.6% monthly or 43% annualized — expensive if held continuously. Most investors use protective puts selectively before specific risk events rather than as permanent continuous insurance.
Selling the stock crystallizes capital gains tax liability and removes you from future upside if your concern proves unfounded. Protective Puts let you maintain the stock position and its potential upside while limiting your downside, at the cost of the put premium. This is particularly valuable when you have significant embedded capital gains in the position.
Related Strategies
Looking for alternatives? 0DTE Options Strategy is a similar Intermediate strategy in the same Options category, with Very High NSE suitability.
MomentumIQ is an educational platform for strategy research and backtesting. We do not provide investment advice, recommendations, or tips. All backtest results are hypothetical, based on historical data, and for educational purposes only. Past performance is not indicative of future results. Backtested results may not account for brokerage, slippage, taxes, or other real-world costs. Please consult a SEBI-registered investment advisor before making any investment decisions.
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