Here are a few things that you should appreciate from the chart above, remember

18400 is the strike price –

1. The Put option seller experiences a loss only when the spot price goes below the

strike price (18400 and lower)

2. The loss is theoretically unlimited (therefore the risk)

3. The Put Option seller will experience a profit (to the extent of premium received) as

and when the spot price trades above the strike price

4. The gains are restricted to the extent of premium received

5. At the breakdown point (18085) the put option seller neither makes money nor

losses money. However at this stage he gives up the entire premium he has

received.

6. You can observe that at the breakdown point, the P&L graph just starts to buckle

down – from a positive territory to the neutral (no profit no loss) situation. It is only

below this point the put option seller starts to lose money.

And with these points, hopefully you should have got the essence of Put Option

selling. Over the last few chapters we have looked at both the call option and the

put option from both the buyer and sellers perspective. In the next chapter we will

quickly summarize the same and shift gear towards other essential concepts of

Options.