Premium
An extra amount paid above a reference price; in options, the price you pay to buy the option.
In plain English
An extra amount paid above a reference price; in options, the price you pay to buy the option.
A premium is an extra on top of a baseline. In options, it is simply the price of the option: what the buyer pays and the seller pockets up front. In forex forwards, a currency trades at a premium when its forward price is higher than its spot price, usually because its interest rate is lower.
You also hear it loosely, as in "the pound is trading at a premium after the data" or a crypto coin trading at a premium on one exchange, such as the kimchi premium.
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