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The price an Option buyer pays or an Option seller receives is called the premium of an Option.
Options premium is the price option buyer must pay to the options seller (or writer) for an option contract.
For example:
Infosys current market price (Spot Price) is Rs 1100. The sellers of an option contact for strike price Rs 1200 is asking for the premium of Rs 20. This Rs 20 is options premium.
In below options chain, the options premium can be found under colums LTP (Last Traded Price). A seprate options premium is quoted for Call & Put Options
Options premium is derived from 2 values:
Options premium = Intrinsic Value + Time Value
Note: If Intrinsic Value comes in -ve, they are considered as 0.
ITM | ATM | OTM | |
---|---|---|---|
Intrinsic Value | YES | NO | NO |
Time Value | YES | YES | YES |
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