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Protected Put
A protected put would involve a long put and a long stock.
For example - ONGC.
Underlying stock = Rs. 809
Buy Mar Rs. 900 Put @ Rs.68.8
Total cost is Rs. 877.8
Maximum Profit: Unlimited
Maximum Loss: Limited
Strike Price - Stock Purchase Price + Premium Paid = 900 - 809 + 68.8 = Rs.159.8
This presents an arbitrage opportunity since the stock is purchased at Rs. 809 and if the Put option is still in-the-money at the expiry, an arbitrage of Rs.22.2 is available.
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