An option premium is
A) paid by the short to the long as soon as the option is purchased.
B) paid by the long to the short as soon as the option is purchased.
C) paid by the long to the short when the option is exercised.
D) paid by the short to the long when the option is exercised.

Question

Quizplus · Accepted Answer

The option premium is the price paid by the buyer (long position) to the seller (short position) of the option contract as soon as the option is purchased. This payment compensates the seller for the risk they are taking.

An Option Premium Is