= 315

Clearly both the results match the expected outcome.

Further, the breakdown point for a Put Option seller can be defined as a point

where the Put Option seller starts making a loss after giving away all the premium

he has collected –

Breakdown point = Strike Price – Premium Received

For the Bank Nifty, the breakdown point would be

= 18400 – 315

= 18085

So as per this definition of the breakdown point, at 18085 the put option seller

should neither make any money nor lose any money. Do note this also means at

this stage, he would lose the entire Premium he has collected. To validate this, let us

apply the P&L formula and calculate the P&L at the breakdown point –

= 315 – Max (0, 18400 – 18085)

= 315 – Max (0, 315)

= 315 – 315

=0

The result obtained in clearly in line with the expectation of the breakdown point.

6.3 – Put option seller’s Payoff

If we connect the P&L points (as seen in the table earlier) and develop a line chart,

we should be able to observe the generalizations we have made on the Put option

seller’s P&L. Please find below the same –