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 ?
For sure, if the S&P 500 goes down 20 per cent, that will hurt (although the option premiums received will cushion the blow).
The Funds primary objective is to provide a high level of current income from interest, dividends and option premiums, and it invests primarily in securities of companies principally engaged in the natural resources and gold industries.
Although markets seem to be relatively quiet, the CBOE's Volatility Index (VIX) logged the largest one-day gain in nearly seven weeks, closing above 11 - an indication that option premiums on the S&P 500 are rising, which could be an early sign that investors are protecting their portfolios from a possible pullback.
The crude's rally from six-year lows plumbed in January and easing option premiums have opened a "great opportunity" to buy extra insurance against a new slump, he said.
The Fund's risk of loss of one or more of its options is exercised and expires in-the-money may substantially outweigh the gains to the Fund from the receipt of such option premiums.
Holders of GLDI will be entitled to receive variable monthly payments based on the notional option premiums received from the sale of the covered call options each month.
If Meg wishes, she can keep selling calls and keep collecting option premiums.
To test this, a multiple regression simulation was used, setting the option premiums after the dividend announcement as the dependent variable, while the option premiums before the dividend announcement coupled with the dividend-greek estimates as the independent variables.
When price moves quickly, especially to the downside, option premiums rise quickly, pushing the VIX higher.
Several sensitivity analyses are conducted to investigate how changes in the value of our model parameters impact option premiums of flexible leases.
It often moves higher when stocks decline sharply as players bid up protective option premiums.