Option premium

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Option premium

Option Premium

The price one pays to buy an option contract, whether it is a call or a put, when one is the first buyer. That is, when the option is written, its first buyer pays the option premium. It should not be confused it with the strike price, which is the price one would pay for the underlying asset, should the option be exercised.

option premium

See premium.

Option premium.

When you buy an option, you pay the seller a nonrefundable amount, known as the option premium, for the right to exercise that option before it expires.

If you sell an option, you receive a premium from the buyer. In fact, collecting the premium is often one motive for selling options, including those you anticipate will expire without being exercised.

An option premium is not a fixed amount, and typically increases as the option moves in-the-money and decreases if it doesn't move in-the-money.

However, factors such as the price and volatility of the underlying instrument, current interest rates, and the amount of time left before the option expires also affect the premium price.

You can look at the current range of premium prices in the Options Quotations tables in newspapers or on options websites, such as the Options Clearing Corporation (OCC) website.

References in periodicals archive ?
Indeed, in comparison to a traditional fixed deposit , a structured deposit gives investors a higher interest rate, because it allows two income streams: interest income plus an option premium.
3,400 - Option premium on convertible notes Total Equity
3%, a 1 EUR change in the underlying price will cause the option premium to change by 45.
Note that the potential return of HVPW is limited to the amount of option premium it receives, while the Fund can potentially lose up to the entire strike price of each option it sells.
Thus, one may also try to approximate the change of an overlying option's premium in an indirect manner by first estimating the possible decline in the stock's value and then using the said decline to calculate the effect in the option premium.
The model is priced at USD32,000 and the sole option Premium Package sells for USD4,000.
income from the option premium because premiums are priced (i.
When a taxpayer writes (grants) a put option (an option the holder may exercise, requiring the option writer to purchase something), either (1) the option is exercised, with the option premium being included in the purchaser's basis for the property purchased; or (2) the option lapses, with the option premium constituting ordinary income to the option writer.
Think about an option premium, which is always smaller than the price of the instrument underlying the option.
When entering into an option contract, the purchaser will pay to the seller or writer of the option an option premium.
When and where the option premium is recognized is quite different and absolutely elective.
the Writer) and (iii) the exchange of consideration takes place at two points in time, first when the option premium is paid, and second when the actual delivery of the commodity takes place (if the Holder so elects).