Explain the Concept of 'Options Premium' ▴ Learn

Explain the Concept of ‘Options Premium’.

The Options Premium is the price paid by the option buyer to the option seller for the rights granted by the contract. It is the market price of the option.

The premium is composed of two main components: Intrinsic Value and Time Value (or Extrinsic Value). The premium is determined by factors like the underlying asset's price, strike price, time to expiration, and volatility.

What Is the Difference between an Option’s Intrinsic Value and Its Time Value?

What Is the Distinction between Intrinsic Value and Time Value in an Option Price?

What Is the Primary Difference between Intrinsic Value and Time Value in an Option’s Premium?

Explain the Concept of “Moneyness” (ITM, ATM, OTM)