Premium in Option Trading (Simple & Clear)
Premium is the price you pay to buy an option (Call or Put).
It’s like a fee to enter the trade.
🔹 Example:
Nifty 50 at 22,000
22,100 Call Option premium = ₹100
👉 If you buy it:
You pay ₹100 × lot size
This ₹100 is your maximum risk
🔹 How You Make Profit:
If premium goes 100 → 150 → Profit ₹50
If premium goes 100 → 50 → Loss ₹50
👉 You don’t need to wait till expiry
👉 You can sell anytime and book profit/loss
🔹 What Moves Premium:
Market Direction (most important)
Time Decay (Theta) → Premium falls daily
Volatility (IV) → High IV = High premium
Demand & Supply
Premium is the price you pay to buy an option (Call or Put).
It’s like a fee to enter the trade.
🔹 Example:
Nifty 50 at 22,000
22,100 Call Option premium = ₹100
👉 If you buy it:
You pay ₹100 × lot size
This ₹100 is your maximum risk
🔹 How You Make Profit:
If premium goes 100 → 150 → Profit ₹50
If premium goes 100 → 50 → Loss ₹50
👉 You don’t need to wait till expiry
👉 You can sell anytime and book profit/loss
🔹 What Moves Premium:
Market Direction (most important)
Time Decay (Theta) → Premium falls daily
Volatility (IV) → High IV = High premium
Demand & Supply
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.