The buyer (long) of a put option:
A) has a maximum loss equal to the premium paid.
B) has a gain equal to but opposite in sign to the writer of the option.
C) has maximum gain potential limited to the difference between the strike price and the premium paid.
D) all of the above

Question

Quizplus · Accepted Answer

A) The buyer of a put option pays a premium to the writer of the option for the right to sell the underlying asset at a specific price. The maximum loss for the buyer is limited to the amount paid for the premium.
B) When the buyer of a put option exercises their rights, the writer of the option is obligated to purchase the underlying asset at the specified price. The gain for the buyer is equal to but opposite in sign to the writer of the option.
C) The buyer of a put option has the potential to earn a profit if the price of the underlying asset decreases below the strike price. The maximum gain potential for the buyer is limited to the difference between the strike price and the premium paid for the option.

The Buyer (Long) of a Put Option