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What Is the Premium of an Options Contract?

The price paid by the buyer to the seller for the rights in the contract, representing the buyer's max loss.
Greeks.Live30.10.25

What Is the Premium of an Options Contract?

The premium is the price a buyer pays to the seller (writer) for the rights conveyed by the options contract. It is the cost of acquiring the option.

This premium is determined by several factors, including the underlying asset's price, the strike price, time to expiration, and implied volatility. For the buyer, the premium represents the maximum possible loss.

For the seller, it is the income received for taking on the risk.

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