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Define the Term ‘Option Premium’ in Simple Terms

The price paid by the buyer to the seller (writer) for the rights granted by the options contract.
Greeks.Live23.11.25

Define the Term ‘Option Premium’ in Simple Terms.

The option premium is the price an investor pays to purchase an options contract. It is the cost of acquiring the right (but not the obligation) to buy or sell the underlying asset at a specified price.

This premium is received by the option writer and represents the maximum loss for the buyer.

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