Price the insurance

You buy a put for 1.50 on 100 shares you own. What is the most the put itself can cost you?

• $150, the premium
• Nothing, because it protects the shares
• Unlimited, if the stock rises a lot

Why does a protective put's breakeven sit above the price you paid for the shares?

• Because the put's strike is above the purchase price
• Because the shares have to rise by the premium just to pay for the put
• Because time decay raises the share price