premium
/ˈpriːmiəm/
the price paid to purchase an options contract
premium in a sentence
“The high implied volatility made the option premium expensive relative to historical norms.”
Origin of premium
Latin praemium reward, prize, from prae before + emere to take
Related Words
implied volatility
the market's forecast of likely future price movement, derived from current option prices
delta
the rate of change in an option's price relative to a $1 move in the underlying asset
theta
the rate at which an option loses value each day due to the passage of time; time decay
hedge
an investment made to reduce the risk of adverse price movements in an asset
futures contract
an agreement to buy or sell an asset at a predetermined price on a specific future date
leverage
the use of borrowed capital to amplify potential returns — and potential losses