Premium

The premium is the price of an options contract — what a buyer pays and a seller collects, quoted per share and multiplied by 100 for a standard contract. Unlike the strike price, which is fixed for the life of the contract, the premium changes constantly with the stock's price, time left until expiration, and expected volatility. It's made up of intrinsic value (what the option would be worth if exercised right now) and time value (the extra amount reflecting the chance it becomes more valuable before expiration). For a buyer, the premium paid is the maximum possible loss; for a seller, it's income collected up front in exchange for taking on an obligation.