Which statement is true regarding the premium of an out-of-the-money put option?

The correct statement regarding the premium of an out-of-the-money put option is that it is solely made up of time value. An out-of-the-money put option has no intrinsic value, as it only becomes valuable if the underlying asset's price drops below the strike price. Because there is no intrinsic value in this situation, the premium paid for the option reflects entirely the time value. This time value encompasses the potential for the underlying asset’s price to decline over the life of the option, alongside market factors such as volatility and time to expiration.

Understanding why time value is the sole component in this case helps clarify how out-of-the-money options function within the broader context of options pricing. The other statements do not accurately represent the characteristics of an out-of-the-money put option's premium, which is an essential concept in options trading.