The price of a stock can only go to zero, so the value of a put option is bounded. A put option at exercise price of $2 has a maximum value of $2 (ignoring discount rate, conditions, etcetera). There are corner cases because a stock going to zero has other implications (e.g. cannot actually trade in that stock) which can affect delivery. Matt Levine puts it nicely: “Betting on disaster is hard because, if you win, there has been a disaster, and you might not get paid.” and he writes about (under CDS heading[2]) some of the other costly risks of shorting, some of which might also apply to options.
The value of a call option is unbounded.
This link[1] has some good questions and answers about options, although it certainly isn’t complete (e.g. dividends are mentioned but voting rights are not).
The value of a call option is unbounded.
This link[1] has some good questions and answers about options, although it certainly isn’t complete (e.g. dividends are mentioned but voting rights are not).
[1] https://www.blackwellpublishing.com/content/kolb5thedition/c...
[2] https://news.bloombergtax.com/tax-insights-and-commentary/ma...