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 ?
Figures 1-5 illustrate the effects of basic parameters on vulnerable option prices where the parameters include the default barrier, long-run mean of stochastic volatility, and jump intensity.
Output early exercise boundaries [S.sup.[theta].sub.f] ([[tau].sub.n]) and American put option prices [V.sup.n.sub.j] (for j = 0, 1, ..., J([[tau].sub.n]) - 1, [V.sup.n.sub.j] = K - [S.sub.j] and for j = J([[tau].sub.n]), ..., N, [V.sup.n.sub.j] are obtained from FDM (38) with the new boundary condition (41)).
The pricing efficiency of options market can be stated to be prevailing, when there is no significant deviation exists between the theoretical option prices obtained from the Black and Scholes model and the observed market prices of the options.
In Figure 5, we present how the option prices vary with the changes of the annual jump intensity v.
The use of Black-Scholes equations in the reduction of banking errors in the computation of fair option prices is also analyzed.
Wiener, 1996, "General-Properties of Option Prices", Journal of Finance, 51:1573-1610
When a new solicitation is issued, however, the option prices are disclosed because the evaluation of bids or offers is based on whether they are better than the option.
The IRS argues that T singly (or she and H jointly) did not own enough T Steel stock to change the option prices from the 1951 buy-sell agreement.
Option prices quoted in the newspapers have to be multiplied by 100 because each option represents 100 shares.
- - Mar 2000 - - - (One unit: 300-Index times 10,000) TOPIX Option Closing Prices on Tokyo Stock Exchange Standard Option Prices (Points) Prices (Points) (Mar) UP/DN (Apr) UP/DN Put 1,150 11.0 DN 2.0 - - 1,175 - - -
In this section, we adopt Monte Carlo simulation to preform numerical experiments for the vulnerable European call option prices under the regime-switching jump-diffusion models.
Then Hull and White [2] assuming variance of asset price was subject to Geometric Brownian motion showed that option price was equal to mean value of Black-Scholes option prices of average variance of yield rates within duration of options.