Glossary Detail: Premium
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Backtesting Premium on High-Beta Names
The price paid to buy an option contract — composed of intrinsic value (if any) plus time value.
Further Details:
The premium is the market price of an option contract. It's what the buyer pays and the seller receives. Premium consists of intrinsic value (how much the option is in-the-money) plus extrinsic/time value (the probability-weighted potential for further movement before expiration).