Glossary
Premium: meaning, example and why it matters
In options, the price the buyer pays the seller for the contract. In an IPO or grey-market context it can also mean the amount above the issue price.
Worked example
An option quoted at ₹12 with a lot of 100 has a premium of ₹1,200 per lot. In the IPO grey market, a premium of ₹12 on an issue price of ₹100 would mean 12% above the issue price.
Illustrative numbers for explanation only. They are not market data, a forecast or a suggestion.
Why it matters
In options the premium is the price of the contract and the most a buyer can lose. In IPO talk it is an informal indicator, not an exchange price.
Related terms
See it in practice
Frequently asked questions
Is an option premium a fee?
No. It is the price the buyer pays the seller for the contract. Brokerage and taxes are separate.
Is this page investment advice?
No. Premium is explained in general terms with illustrative numbers. Market Dekho is not a SEBI-registered Research Analyst or Investment Adviser.
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Educational content, not investment advice. Market Dekho is not a SEBI-registered Research Analyst or Investment Adviser. Spotted a mistake? Email marketdekho01@gmail.com.