Premium
The price of an option, quoted per share and paid per contract (quote × 100). The buyer pays it for the right the option conveys; the seller receives it for taking on the matching obligation.
Premium splits cleanly into intrinsic value (what exercising would be worth right now) and extrinsic value (everything else — time, volatility, rates). For out-of-the-money options the premium is pure extrinsic value, which is why it melts away as expiration approaches if the stock does not move.
A quoted premium of 2.50 means $250 of actual money per contract. Keeping the multiplier in mind prevents the most common beginner sizing mistake.
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