Final answer:
A long put is an options strategy in which the buyer has the right to sell a specific quantity of the underlying asset at a predetermined price. The maximum gain is achieved when the price of the underlying asset goes to zero. The maximum loss is equal to the premium paid for the option.
Step-by-step explanation:
A long put is an options strategy in which the buyer has the right, but not the obligation, to sell a specific quantity of the underlying asset at a predetermined price, known as the strike price, on or before the expiration date of the option.
The maximum gain for a long put is achieved when the price of the underlying asset goes to zero. In this case, the put option will be in-the-money and the buyer can sell the asset at the strike price, resulting in a gain equal to the strike price. There is no theoretical limit to the maximum gain.
The maximum loss for a long put is equal to the premium paid for the option. This occurs when the price of the underlying asset is above the strike price at expiration, making the option worthless.
The breakeven point for a long put is the strike price minus the premium paid for the option. Below this price, the buyer starts to make a profit.