Derivatives
Option Premium
Definition
What is Option Premium?
The price paid by an option buyer to the seller.
Example in practice
How This Looks in Practice
The investorA person or organisation that commits capital with the expectation of a financial return. pays a ₦3 premium for a call optionAn option giving the holder the right to buy the underlying asset at the strike price..
Keep learning
Related Terms
Derivatives
Derivative
A contract whose value depends on an underlying asset, rate, index, or event.
DerivativesUnderlying Asset
The asset, rate, index, or reference on which a derivative's value is based.
DerivativesNotional Amount
The reference amount used to calculate derivative payments, which may exceed the cash initially exchanged.
Derivatives StrategiesCovered Call
A strategy that owns the underlying asset and sells call options against it.