PCR Trading Strategies

Pricing and Premiums:
The price of an option, called the premium, is influenced by several factors: the underlying asset’s price, the strike price, time until expiration, volatility, and interest rates. Options with a longer duration or higher volatility generally have higher premiums. The premium is essentially the cost of controlling the asset without owning it outright. For buyers, the premium is the maximum potential loss, while sellers (writers) collect it as income but take on potentially unlimited risk. Understanding how premiums change with market conditions is crucial for traders to time entries and exits effectively.