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Glossary · Options

Premium

The price of an option, quoted per share.

Why it matters

Premium = intrinsic value (what it would be worth if exercised now) + extrinsic value (time and volatility). At expiration the extrinsic part is zero.

How to read it

Multiply by 100 for the cost of one contract.

Related

Intrinsic and extrinsic valueIntrinsic is an option’s exercise value now; extrinsic is everything else, paid for time and uncertainty.Implied volatilityThe yearly volatility that today’s option prices imply. Higher IV means pricier options.

In the Cluenex app, this explanation opens next to every premium figure, with the live reading for the stock you are looking at. Open it in Cluenex