3rd December 2019

investopedia
8

What is the premium on a call option?

Call premium is the dollar amount over the par value of a callable debt security that is given to holders when the security is redeemed early by the issuer. In options terminology, the call premium is the amount that the purchaser of a call option must pay to the writer.

Hereof, what is the payoff of an option?

A convenient way to envision what happens with option strategies as the value of the underlying asset changes is with the use of a profit and loss diagram, known as a “payoff diagram”. A Payoff diagram is a graphical representation of the potential outcomes of a strategy.

What is premium price in options?

The premium is the price a buyer pays the seller for an option. The premium is paid up front at purchase and is not refundable - even if the option is not exercised. Premiums are quoted on a per-share basis. Thus, a premium of $0.21 represents a premium payment of $21.00 per option contract ($0.21 x 100 shares).

How does an option contract work?

Option buyers have the right, but not the obligation, to buy (call) or sell (put) the underlying stock (or futures contract) at a specified price until the 3rd Friday of their expiration month. There are two kinds of options: calls and puts. Put options give you the right to sell the underlying asset.
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