Options trading
Premium
Definition
The price of the option, quoted per share. A quote of $2.50 on a standard contract costs $250, because one contract covers 100 shares.
Example
Suppose a call is quoted at $3.40 and you buy 5 contracts: you pay $3.40 × 100 × 5 = $1,700, plus any commissions. That $1,700 is the most you can lose as the buyer, and the seller collects it upfront. If the quote later rises to $4.10, your contracts are worth $2,050, a $350 gain on paper.
Hypothetical numbers, for illustration only.
Also defined in
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