What is the meaning of “Premium” in the context of an options contract?

Since the owner has the right to either exercise the contract or let it simply expire worthless, she pays the premium–the per-share cost for holding the contract–to the seller. As a buyer, you can think of the premium as the price to purchase the option. If you buy or sell an option before expiration, the premium is the price it trades for. You can trade the option in the market the same way you’d trade a stock. The premium is not arbitrary, as it’s tied to the value of the contract and the underlying security: the underlying stock’s price, the underlying stock’s volatility, and the amount of time left until expiration all influence an option’s premium.