Premium
The premium is the price a buyer pays the seller for an option, quoted per share and multiplied by 100 for one standard contract.
Premium is the sum of intrinsic value (how far in-the-money the option is) and extrinsic value (time value plus volatility value). Buyers pay it; sellers collect it.
A premium quoted at $2.35 costs $235 for one 100-share contract. Premiums rise with higher implied volatility and more time to expiration.
Example. An option quoted at $1.80 costs $180 to buy one contract; the seller receives that $180 in exchange for taking on the obligation.
FAQ
What determines an option’s premium?
Strike vs. spot (intrinsic value), time to expiration, implied volatility, interest rates, and dividends — the inputs to models like Black–Scholes.
Why did my option premium fall even though the stock did not move?
Time decay (theta) and falling implied volatility both erode premium independent of the stock’s price.