Option fee

An option fee, also called a premium, is the price a buyer pays to obtain the right—not the obligation—to buy or sell an asset, like stocks or property, at a predetermined price within a specific period. This fee compensates the seller for taking on the potential risk of having to sell or buy the asset if the buyer chooses to exercise the option. Essentially, the option fee secures the opportunity for the buyer to make a strategic move later, without obligating them to do so immediately.