23-18 The losses on a purchased put option position when rates fall are limited to the option premium paid.

Question

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When rates fall, the value of the underlying asset (e.g. stock, bond, commodity) may increase, resulting in a potential loss on the purchased put option position. However, this loss is limited to the option premium paid, as the holder of the put option has the right to sell the underlying asset at the strike price specified in the option contract. If the market price of the underlying asset is above the strike price, the put option would expire worthless and the holder would only lose the premium paid.

23-18 the Losses on a Purchased Put Option Position When