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In Options Trading, What Is the Role of the ‘Premium’?

Price paid. Max loss Buyer. Max profit Seller. $Delta$ Time $rightarrow Delta$ Price.
Greeks.Live18.11.25

In Options Trading, What Is the Role of the ‘Premium’?

The premium is the price paid by the option buyer to the option seller (writer) for the contract. It represents the maximum loss for the buyer and the maximum profit for the seller.

The premium is determined by factors like the underlying asset's price, volatility, time to expiration, and interest rates. It is paid upfront.

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