Options & derivatives
Premium
The premium is the price the option buyer pays the seller for the right the option grants.
The premium is the price the option buyer pays the seller for the right the option grants.
It is the cost of the option, and the buyer's maximum loss. The premium depends on the strike, time remaining and volatility: the further the expiry and the more volatile the asset, the higher the premium.
You pay a $2 premium per share for a call: that is all you can lose.
Understanding a term is good. Applying it on a real platform with a clear method is better. That is exactly what we do in 5 days.