Options Price 

The Options premium refers to the price paid by the buyer to the seller in exchange for the right to buy or sell an underlying asset at a specified price within a specific time period.

In other words, it is the cost of the option contract.

It is influenced by several factors, including the current market price of the underlying asset, the strike price of the option, the time remaining until expiration, and the volatility of the underlying asset.

For example, let’s say a trader wants to buy a call option on Reliance Industries with a strike price of 2,200 INR and a premium of 50 INR. This means that the trader pays 50 INR per share to the option seller for the right to buy Reliance Industries shares at 2,200 INR before the expiration date. 

  • If the share price of Reliance Industries increases above 2,250 INR before the expiration date, the trader can exercise the option and earn a profit. 
  • However, if the share price remains below 2,200 INR, the option expires worthless, and the trader loses the premium paid.