PDB Academy

Academy › Glossary › Options

Premium (option)

The price of an option contract.

OptionsBeginner

Definition

The premium is quoted per share, and one standard contract covers 100 shares, so a quote of $2.50 costs $250 per contract. It equals intrinsic value plus extrinsic value. For a buyer, it is the most that can be lost on a long option.

Formula

Contract cost = quoted premium x 100

Learn it in context with PDB Academy

Guides, short videos and a plain-English glossary in one place, with tools to try each idea on real market data. The basics are free.

Create a free accountOpen PDB Academy