Wednesday 10 Jun 2026. The Nifty 22,500 put, 3.2% below the June future, settled at 94.55 a unit. For one lot of 65 units that is Rs 6,146. On Tuesday 30 Jun it expired worthless: Nifty closed at 23,865.75, 2.7% above the future. Was the money wasted? Ask a different question. What did it buy? Twenty days in which the loss on a lot of the future had a floor. I think of a hedge as a bill, not a bet. This lesson puts numbers on the bill, on what it buys and on when the bill runs high. Every figure is from NSE end of day files and dated, so nothing is live and none of it says where Nifty goes next.
3By the end you can
- Read a put hedge as insurance: premium, deductible, cover, term and claim.
- Work out what cover costs as a share of the holding, and why it costs more after a fall.
- Say why a loss needs a bigger gain to undo, and what a put every month adds up to.
The idea, plainly
What is a hedge?
A hedge is a position you take to cut a risk you already carry. It does not make money. It costs money and removes some loss. The easiest way to read a put hedge is as an insurance policy.
| Insurance | Put hedge | June 2026 example |
|---|---|---|
| Premium | The put's price | 94.55 a unit |
| Deductible | Points from the future down to the strike | 740.10 points |
| Cover | Lots, each of 65 units | One lot |
| Term | Days to expiry | 20 days |
| Claim | The put's value at expiry, if any | None on 30 Jun |
Why hedge at all?
Losses are lopsided. Nifty closed at 25,471.10 on 13 Feb 2026 and at 22,331.40 on 30 Mar, a fall of 12.3%. To get back to the 13 Feb close it needed a rise of 14.1%. On 10 Jul 2026 it was still 5.0% under it. A hedge is for a loss big enough to change what you do next. People hedge for one of two reasons. A date: money that must be there on a known day, such as a loan, a fee or a purchase. A size: a holding so large that a fall of this kind would change plans. A hunch is not on the list. A hunch is a view, and a hedge placed on a view is a bet.
There are three ways to take loss off the table, and only one keeps the upside.
Three ways to cut a loss, and only the put keeps the gains
What does cover cost?
The further the strike sits below the future, the less the put costs, because you carry more of the loss yourself. On 10 Jun 2026 the 23,000 put, 1.0% below the future, cost 0.95% of it. The 22,500 put, 3.2% below, cost 0.41%. The 22,000 put, 5.3% below, cost 0.17%.
The nearer the strike, the dearer the cover
When is cover dear?
Fear sets the price. When India VIX jumps, puts jump with it. On 7 Apr 2025, with VIX at 22.79, the put 3.0% below the future cost 1.30% of it and the one 5.0% below cost 0.93%. On 10 Jun 2026, at 15.63, the puts 3.2% and 4.9% below cost 0.41% and 0.20%. Cover is cheaper on calm days and dearer after a fall.
The same cover cost several times more in a fearful session
Is buying puts every month worth it?
A put bought every month is a standing bill, twelve payments a year. At June's price for the 22,500 put, twelve payments come to 4.9% of the holding before any fall. A thirty day put costs more than this twenty day one, so the real bill is higher. Against it stands the fall: 12.3% from 13 Feb to 30 Mar 2026. The 24,000 put bought on 2 Feb 2026 for 130.25 a unit paid Rs 1,08,459 a lot at expiry. Both months are real and neither is a verdict. Whether twelve payments are worth a protected fall depends on what you can afford to lose, on how long you can wait and on the price of cover that day. The bill is certain. The fall is not. Holding less equity, or keeping cash aside for the known date, also limits the damage with no premium to pay, though the gains shrink too.
Worked example: one lot, two months
A holder of one lot of the Nifty future buys a put on the same day and holds both to expiry. The June put is the 22,500 from above. The second is the March 24,000 put bought on 2 Feb 2026, 5.1% below the future of 25,297.40, with 56 days to run. Both expiries settled on the index close, the rule for expiries before 7 Dec 2026.
| One lot | 10 to 30 Jun 2026 | 2 Feb to 30 Mar 2026 |
|---|---|---|
| Future at the start | 23,240.10 | 25,297.40 |
| Put bought | 22,500 | 24,000 |
| Premium a unit | 94.55 | 130.25 |
| Cost of one lot | Rs 6,146 | Rs 8,466 |
| Nifty close at expiry | 23,865.75 | 22,331.40 |
| Put value at expiry, one lot | Expired worthless | Rs 1,08,459 |
| Holding without the put | Rs 40,667 | −Rs 1,92,790 |
| Holding with the put | Rs 34,522 | −Rs 92,797 |
Nifty fell through the put's strike, and the put paid for every point below it
Read 2 more paragraphs, 134 words
In June the put cost Rs 6,146 and the holder earned that much less than the bare future. In February and March the same kind of cover turned a loss of Rs 1,92,790 into Rs 92,797. The index dropped below the strike of 24,000 and the put paid for every point under it. A put exercised at expiry also carries STT on its intrinsic value. On 30 Mar 2026 the rate was 0.125%, so here Rs 135.57. From 1 Apr 2026 it is 0.15%.
Two months show the shape, not how often it happens. All prices are settlement prices. Real cover is bought at an ask and costs brokerage as well. The payoff builder below opens on a nearer strike. Set the put to 22,500 to draw the June row.
The common mistake
The belief: A hedge that expires worthless was wasted money.
Test it on the table. The June put expired worthless and cost Rs 6,146. It bought twenty days of a floor. The put bought on 2 Feb 2026 paid Rs 1,08,459 on a premium of Rs 8,466. Judging a hedge by whether it paid is like judging fire cover by whether the house burned. The other side is just as wrong: a hedge is not free and not always worth it. Judge it by the loss it removes at a price you can carry, and set that against twelve premiums a year.
Key takeaways
- A hedge cuts a risk you hold. It costs money and earns none.
- A put hedge reads like insurance: premium, deductible, cover, term, claim.
- A 12.3% fall needs a 14.1% rise to undo.
- Cover costs more after a fall, when India VIX is high.
- A put every month is a standing bill of twelve payments a year.
- An unused hedge still bought cover. Judge it by the loss it removed.
3 terms this section turns on
Before you trade. Derivatives trading carries a high risk of loss. SEBI's study "Profitability of Individual Traders in the Equity Derivatives Segment (FY25 to FY26)" (August 2026) found that 87.7% of individual traders in equity F&O made net losses in FY26, with aggregate net losses of Rs 91,685 crore. Read the SEBI study