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Option Premiums And Their Impact On Options Trading

traders

Understanding option premiums isn’t nearly as complicated as you might think. Once you understand how to trade options, you’ll see that the option premium is simply the current price of a stock option. The buyer of an options contract has the right — but not the obligation — to buy or sell an underlying asset and the option premium is simply the price you pay for having such an opportunity.

In this article, we’ll review the basics of options trading, explore what the option premium is, and cover the two main drivers of option premium pricing — all with the end goal of getting you closer to trading option contracts with more confidence.

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Note: This article originally appeared at Investors Alley.