Does the protective put protects even if the stock is down from 120 - 60 or less in a matter of few trading sessions. What happens in the case of IDFC which dropped from 130 -60? What happens to traders who bought 130 put, 120 puts when no volume is happening in those strike prices now? OI is still showing open positions but do they get closed? if yes at what rate?
Protective puts are like insurance policies, there is a cost of premium to buy the put. But it covers you all the way down.
IDFC was demerged into IDFC and IDFC Bank. 1 share of IDFC would get you 1 share of IDFC and 1 share of IDFC Bank. So the drop in the stock price you see is because of that and not because of a market price drop.
NSE had expired all existing F&O contracts (Sept, oct, nov) on Sept 30th, and introduced new contracts on Oct 1st. Check the IDFC circular from NSE here: https://zerodha.com/marketintel/Circulars/
So this way no F&O contract actually saw a drop from 130 to 60.