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 ?
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.
Sass Equity Income Plus Fund (EIP) Complements Equity and Fixed Income Portfolio Allocations and Offers Potential to Generate Attractive Dividend Income Plus Cash Flow from Call Option Premiums with Possible Downside Protection from the Purchase of Index Puts
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.
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.
It often moves higher when stocks decline sharply as players bid up protective option premiums.
option premiums or forward delivery price) tax-free into the United States by having the CFC purchase options on, or enter into prepaid forward contracts to acquire, the parent's stock without running afoul of [section] 956.
com to search for the best covered calls based on their trading strategy, and to select the contracts most adapted to their portfolio in order to sell call options and capture option premiums.
The goal of the Option Strategy is to generate income from option premiums in an attempt to enhance the distributions payable to shareholders and reduce overall portfolio volatility.
The potential advantages of a buy-write strategy are gaining exposure to returns from option premiums while simultaneously attempting to lower portfolio volatility and mitigate downside exposure," added Mr.
The Gabelli Natural Resources, Gold & Income Trust is a non-diversified, closed-end management investment company whose primary investment objective is to provide a high level of current income from interest, dividends and option premiums.