My apologies if this is too simple a question, but there's a (possible) misconception that I wanted to clear. I did search for resources on the web and I think I have understood about 90% of the mechanics involved but there are some aspects that I don't think I have properly understood.
For the rest of this post, I am focusing on the worst-case scenario.
Given my personal circumstances and risk appetite, I don't think I will ever buy shorts since they have an unlimited associated risk. However, for lesser returns (esp. factoring in theta decay), buying puts can serve a functionally similar purpose.
Either owing to faulty advice or my inability to comprehend what was being said during a lunch with my ex-colleagues, I have formed a conception that at expiration puts are converted to shorts. On the contrary, the recent YouTube videos that I have seen and some blog articles that I have read, seem to suggest that puts have limited risk involved. Which of these two things is true (since if puts become shorts the latter represents unlimited risk)?
Consider a worst-case scenario where I am hospitalized for a month (say for COVID-19) and the date of expiration coincides with the mid-point of my stay in the hospital. Is there an action that I have to take to prevent puts from turning into a contract that represents unlimited risk? I don't mind a scenario where a $1000 worth of puts turn worthless at expiration. It's a costly lesson for sure, but it's something that can be lived with. However, I don't want a scenario where after coming out of the hospital I have in my hand a contract that makes me responsible for hundreds of thousands of dollars (the whole point in avoiding shorts in the first place).
For any and all scenarios: Is it true that the risk in buying puts is limited? Is it true that the maximum amount I can lose in puts equal to the amount I spent while buying them?