What is a key feature of a long put option?

A long put option provides the holder with the right to sell a specific asset at a predetermined price within a specified time frame. The key feature of this strategy is that it allows the investor to profit from a decline in the asset's price. When the asset price falls below the strike price of the put option, the holder can exercise the option to sell the asset at the higher strike price, thereby realizing a profit.

The correct answer highlights that while a long put option has the potential for substantial gains if the underlying asset's price decreases significantly, it also has a limited upside profit potential. This is because the maximum profit that can be achieved is capped at the strike price minus the premium paid for the option. Thus, if the asset's price drops to zero, the maximum profit is the strike price minus what was initially paid for the option.

In terms of risk, the potential loss is also limited to the premium paid for the put option, reinforcing the idea that while there is a defined profit opportunity associated with a long put, it does not grant unlimited profit potential as might be seen in other trading strategies. This is why a long put option cannot be associated with unlimited profit, unlimited liability, or zero risk—features more aligned with other financial instruments or