Derivatives

Option Premium

Definition

What is Option Premium?

The price paid by an option buyer to the seller.

Example in practice

The investor pays a ₦3 premium for a call option.

Keep learning

A contract whose value depends on an underlying asset, rate, index, or event.

The asset, rate, index, or reference on which a derivative's value is based.

The reference amount used to calculate derivative payments, which may exceed the cash initially exchanged.

A strategy that owns the underlying asset and sells call options against it.

Think you know your investing terms?

Put your knowledge to the test with a quick quiz.