Option Premium

Option premium

The option price.

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option premium

See premium.

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Option Premium

The price of an option contract. That is, it is the price that a buyer pays a seller in exchange for a call or a put. Importantly, the option premium differs from the strike price, which is the price the option holder pays if he/she exercises the option.

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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.