Introduction to Options Pricing

Option price or option premium is the amount per share that an option buyer pays to the seller.

The premium is the price at which the contract trades. The premium is the price of the option and is paid by the buyer to the writer, or seller, of the option.

In return, the writer of the call option is obligated to deliver the underlying security to an option buyer if the call is exercised or buy the underlying security if the put is exercised.

The writer keeps the premium whether or not the option is exercised.

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