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Option Premium
The option premium is the cost paid by a buyer to acquire the rights embedded in an option contract, reflecting intrinsic and time value.
In oil markets, premiums fluctuate with volatility, time to expiry, and underlying price levels. Sellers receive the premium as compensation for assuming risk.
Premium pricing is influenced by supply-demand dynamics, macroeconomic conditions, and market sentiment.
Understanding premiums is essential for hedging, speculative strategies, and risk assessment.