What is Premium?
The premium is the price paid to buy an option, set by the market and quoted per share or per contract. It reflects factors like how far the strike is from the current price, how much time remains, and how volatile the underlying is. For an option buyer the premium is the maximum loss; for the seller it is the amount received up front in exchange for taking on obligation.
Why Premium matters
It is both the cost and the defined risk for an option buyer, so it frames the whole trade.
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