The buyer of a long 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's maximum loss is equal to the premium paid because the buyer can simply choose not to exercise the option if it is out of the money.
B) The buyer's gain will be opposite in sign to the writer's gain/loss since options trading is a zero sum game, meaning for every winner there is a loser.
C) The buyer's maximum gain potential is limited to the difference between the strike price and the premium paid, as this is the most the buyer can profit from the option.

The Buyer of a Long Put Option