Premium Income

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Dictionary Says

Definition of 'Premium Income'

1. In investing, income that is earned through the sale of an option. The writer of an option earns premium income; the buyer of the option pays the writer a premium in order to have the right (but not the obligation) to exercise the option at a fixed price and specified date.

2. In insurance, revenues that an insurer receives as premiums paid by its customers for insurance products. When a customer purchases an insurance product, such as a health insurance policy, the customers cost for a specified term of the policy is called the premium.

Investopedia Says

Investopedia explains 'Premium Income'

1. An option's original sales price is referred to as its premium; this is the price that the buyer of a put or call must pay to the seller (writer) of an options contract. Investors can profit by writing covered options contracts when the underlying stock is owned; or by writing a naked option if the underlying is not owned. If the option expires without being exercised, the option writer profits by the full premium amount.

2. An insurance company's premium income is revenue that is derived from premiums paid by customers. Premiums are paid for all types of insurance policies including health, automobile and home. A premium is the cost paid for coverage under the policy for a certain period of time. This excludes other sources of revenue such as investment income.  

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'Premium Income'

  • Premium Bonds: Problems And Opportunities

    http://www.investopedia.com/articles/bonds/11/premium-bonds-pros-cons.asp
    ... gain on the sale of their bonds, while the purchase of equivalent premium bonds
    would reduce future ordinary interest income through premium amortization. ...

  • A Look At Single-Premium Life Insurance

    http://www.investopedia.com/articles/pf/05/SinglePremLife.asp
    ... For example, a 60-year-old female might use a $25,000 single premium to provide
    a $50,000 income-tax free death benefit to her beneficiaries, whereas a 50-year ...

  • Diversifying A Concentrated Stock Position

    http://www.investopedia.com/articles/stocks/11/diversify-stock-position.asp
    ... The sale of the call option provides the investor with premium income that
    they can use to pay for the purchase of the put option. ...

  • Option Strategies For A Down Market

    http://www.investopedia.com/articles/optioninvestor/10/options-strategies-down-market.asp
    ... While sophisticated options traders like to sell puts in hopes of pocketing the
    premium income, novice traders should look at selling put options in order to ...

  • CFA Level 1 Study Guide - Portfolio Management - The Risk Premium ...

    http://www.investopedia.com/exam-guide/cfa-level-1/portfolio-management/risk-premium.asp
    ... Real Estate; Statistics; Stocks; Taxes; Venture Capital. More News ». Investing;
    Investing Basics; Bonds & Fixed Income; Fundamental Analysis; Mutual Funds & EFTs ...

  • Live Longer, Retire Younger: Can You Do It?

    http://www.investopedia.com/articles/retirement/07/insureretirement.asp
    ... For the level-premium payment option, the payments are usually required to be completed
    before you begin to receive your income amounts from the annuity. ...

  • The Equity-Risk Premium: More Risk For Higher Returns

    http://www.investopedia.com/articles/04/012104.asp
    ... expected equity premium is 4%; we therefore expect equity returns of 7%. Say we
    earn the risk-free rate entirely in bond coupons taxed at ordinary income tax ...

  • Collecting Option Premium In The Grain Market

    http://www.investopedia.com/articles/optioninvestor/08/collecting-option-premium-grain-market.asp
    ... premium in the grain markets is easier once you learn the types of strategies available
    and find out when to use them. Read on to learn about these income- ...

  • TreeHouse Foods – Store Brands At A Premium Price

    http://stocks.investopedia.com/stock-analysis/2011/TreeHouse-Foods--Store-Brands-At-A-Premium-Price-THS-WMT-GIS-K1108.aspx
    ... Sometimes the market falls in love with companies that offer premium-priced goods ...
    Likewise, operating income rose 10% and the company saw slight erosion in the ...

  • Choosing The Best Disability Insurance

    http://www.investopedia.com/articles/pf/06/disabilityinsurance.asp
    ... Whether your benefits are taxable will typically depend on how the premium is paid ...
    for you, then the benefit will likely be treated as taxable income when paid ...

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