What Is an Options Premium? - TheStreet Definition

Dictionary of Financial Terms

The total price of an option contract. The premium is paid to the seller of the option and is quoted on a per-share basis. Thus, a premium of 7/8 on a option contract represents a payment of $87.50 ($0.875 x 100 shares).

Premium is not refundable, nor does it ever come back to the option buyer in any way. In some strategies that lay out buying and selling options on the same stock, the selling portion of the theory is to collect premium to defray the cost of the purchase.

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