[awad]

Technically the put doesn't guarantee anything since not everyone is too big to fail but for most purposes this is true.

[ABCLAW]

Not sure why this is being voted down. A counterparty in an option agreement can become insolvent. This is typically analyzed under the name counterparty risk.

Much much much less common than a stock going down, but when large counterparties become insolvent, a lot of people start needing to write off big chunks of their positions.