Option premium

The premium is distinct from the exercise price and generally remains a cost whether or not the option is exercised. At a given date, option value can be analysed into intrinsic value and time value. Quotation units matter: a premium may be per share, per currency unit or expressed using an interest-rate convention, so apply the contract size and period correctly. If comparing future hedge outcomes, consider the time value of a premium paid now where required. A zero net-premium strategy can still have important obligations and opportunity costs.