What are option premiums in trading?

The current market price of an option contract is known as the option premium. It's the money paid to the seller (writer) of an option contract by another individual, known as the buyer (taker).

Intrinsic and extrinsic value make up in-the-money option premiums. A put option's premium is simply the extrinsic value.

Premiums for stock options are typically expressed as a dollar amount per share, and most agreements cover the commitment of 100 shares.