What is the premium in options trading?

The Premium is the price that a buyer pays in order to purchase an option, or looking at it from the other side, it is the price a seller gets for selling an option. The premium is a significant aspect of options trading.

If you are familiar with the stock market, you may think of the premium as the bid price and the ask price. As the market undergoes changes, the price of premiums of different stocks also undergo changes.