Finance glossary
Option Premium
Definition
The price paid to buy an options contract.
The premium is the cost of an option, paid by the buyer to the seller. It consists of intrinsic value plus time value and is influenced by the underlying price, strike, time to expiration, and implied volatility. For the seller, the premium is the maximum potential profit.
In a sentence
He paid a $3 option premium per share for the right to buy the stock later at a fixed price.
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