Option Premium

Option premium is the price paid by a buyer to acquire an options contract from the seller. It reflects the current market value of the right to buy or sell an underlying asset at a specified price before expiration. The premium accounts for factors like the asset’s price, volatility, time remaining, and prevailing interest rates. Essentially, it’s the upfront cost that grants the buyer the potential to benefit from price movements without owning the asset outright. For the seller, the premium is income received, with the obligation to fulfill the contract if the buyer exercises their option.