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The price paid by the buyer of an options contract to the seller (writer) for the rights conveyed by the contract.
The options premium is composed of intrinsic value (the amount the option is "in the money") and extrinsic value (time value and implied volatility). A call option with a $50 strike price on a stock trading at $55 has $5 of intrinsic value; any additional premium is extrinsic. Time value decays as expiration approaches (theta decay), accelerating in the final 30 days. Higher implied volatility increases premiums because there is a greater probability of large price moves. Options sellers collect premiums as income but take on the obligation to fulfill the contract if exercised.