Short selling is restricted in India as in many countries in the world, while retail investors have no such obligations. Short selling is when you sell a security that you don’t own but have borrowed from the market. Traders use it when they believe a stock, currency, or other asset will have considerable negative movement in the future. Put options are a different approach to take a bearish position on stocks or indices. When you purchase a put option, you are purchasing the right to sell underlying assets at the option’s specified price. You are under no obligation to buy the asset backed by the put.
With short selling the maximum loss can be up to any extent the price of the stock goes to whereas in the case of put option, the maximum loss will be the price paid for the put.
Suppose let’s take the example of Tata power which has its current price 273.10 INR.
In case we buy a put option for 100 stocks, expecting the strike price to drop to Rs.260 and instead the price rises to Rs.280 the maximum loss will be Premium price of let’s say Rs.50. So total loss is Rs.50 In case of short selling, we have to bear the loss of increase i.e., 7*100= 700Rs