The Options Premium



Next video:
Loading the player...

An options premium is the cost for buying a call or put option. The two components that affect options pricing are the intrinsic value and time value.
 

Related Articles
  1. Options & Futures

    The Butterfly Spread

    A butterfly spread is a neutral options strategy with both limited risk and limited profit potential. The strategy involves four options contracts with the same expiration month but with three ...
  2. Options & Futures

    Understanding Out Of The Money Options

    Options offer investors a way to leverage their capital for greater investment returns. Find out what out the money means for option investors.
  3. Options & Futures

    In The Money Options

    Options offer investors a way to leverage their capital for greater investment returns. Find out what in the money means for option investors.
  4. Options & Futures

    Explaining The Naked Call

    A naked call is one of the riskier options strategies around. Find out how this strategy works, as well as the potential risks and rewards of using it.
  5. Options & Futures

    Put Option Basics

    Put option allow investors to hedge an investment they own or speculate in an investment they don't own. Find out more about this type of option and how it can work in an investor's favor.
  6. Trading Strategies

    Call Option Basics

    Call options offer investors a way to leverage their capital for greater investment returns. Find out more about these financial contracts and how they work.
  7. Term

    The Difference Between a Long and Short Position

    Stocks are owned in a long position and owed in a short position.
  8. Options & Futures

    When Should I Sell A Put Option Vs A Call Option?

    Beginning traders often ask not when they should buy options, but rather, when they should sell them.
  9. Investing Basics

    Explaining Premiums

    Premium has a few different meanings in the financial world.
  10. Options & Futures

    How Do Options Work?

    An option is a contract that sets a price and time for the sale or purchase of a financial asset. It derives its value from the performance of an underlying security.

You May Also Like

Hot Definitions
  1. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  2. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  3. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  4. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  5. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  6. Economies Of Scale

    Economies of scale is the cost advantage that arises with increased output of a product. Economies of scale arise because ...
Trading Center