Step Premium

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Dictionary Says

Definition of 'Step Premium'

A type of option where the cost of purchasing the option is paid gradually as the strike approaches instead of when the trade is initiated. The options contract spells out how much premium must be paid and when. A step premium option is more expensive than a plain vanilla in-the-money option, but less expensive than a contingent premium option. With the latter, the investor does not pay a premium if the option expires out of the money.
Investopedia Says

Investopedia explains 'Step Premium'

A step premium option is considered a structured option. A wide variety of options exist to meet different investment needs, and their premiums reflect the unique risks and rewards associated with each type of option. Investors like options because they offer a cost-efficient way to invest in an underlying asset, they can reduce investment risk when used correctly, they allow the potential for higher percentage returns by using leverage and they provide the flexibility to develop numerous trading strategies.
Search results for

'Step Premium'

  • Premium Bonds: Problems And Opportunities

    http://www.investopedia.com/articles/bonds/11/premium-bonds-pros-cons.asp
    ... between interest payments. Step 3: Determine the amount of premium to amortize
    for the given accrual period. To determine this value ...

  • Calculating The Equity Risk Premium

    http://www.investopedia.com/articles/04/020404.asp
    ... (For background reading, see The Equity Risk Premium - Part 1.) Step One: Estimate
    the Expected Total Return on Stocks Estimating future stock returns is the ...

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

    http://www.investopedia.com/articles/04/012104.asp
    ... range of expected equity returns; step two is to deduct a risk-free rate of return
    and; and step three is to try to arrive at a reasonable equity risk premium. ...

  • Utica Shale Moves A Step Forward

    http://stocks.investopedia.com/stock-analysis/2010/Utica-Shale-Moves-A-Step-Forward-QEC-GMR-FST-RRC-TLM0303.aspx
    ... Utica Shale Moves A Step Forward. ... Natural gas sold here also sells at a
    premium price relative to other hubs in the United States. ...

  • Intangible Assets Provide Real Value To Stocks

    http://www.investopedia.com/articles/03/010603.asp
    ... Step 7: Calculate the net present value of the premium. Do this by dividing the
    premium by an appropriate discount rate, such as the company's cost of capital. ...

  • Get A Step Up With Credit Shelter Trusts

    http://www.investopedia.com/articles/retirement/07/credit-shelter-trusts.asp
    ... of the stock and uses the proceeds to purchase a $2 million single-premium universal
    life ... of the trust property into another $2 million with another step-up in ...

  • Projected Returns: Honing The Craft

    http://www.investopedia.com/articles/05/020805.asp
    ... Total Return-US Equities: Risk Free Asset + Equity Premium + Projected Inflation
    12/31 ... Summary Deciphering historical returns is the first step in understanding ...

  • Tips For Series 7 Options Questions

    http://www.investopedia.com/articles/professionaleducation/06/Series7Options.asp
    ... find helpful is PSH - In a Put spread Subtract the net premium from the ... If you use
    the four-step process, you can dramatically increase your chances of getting ...

  • CFA Question of the Week 05/10/2005 | Investopedia

    http://www.investopedia.com/professionals/questionoftheweek/cfa/051005.asp
    ... Step 2. Find E(R) E(R) = Rf + B(Rm - Rf) = 3% + (0.875)(5%) = 7.38% Note that the
    market risk premium is the difference between the expected market return on a ...

  • 5 Mistakes That Can Ruin Your Life (Insurance)

    http://www.investopedia.com/articles/pf/08/five-insurance-mistakes.asp
    ... you may be able to maintain the policy by making additional premium payments, assuming
    you ... a Better Balance Between Your Business and Your Life: A Step-by-Step ...

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