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Glossary Terms starting with P

Premium

In short

The price a buyer pays to purchase an option contract.

Updated Aug 9, 2026

The premium is the price paid by an option buyer to the option seller (writer) for the rights conveyed by the contract. It is quoted on a per-share basis and multiplied by the lot size to arrive at the total cost. The premium is made up of intrinsic value and time value, and it is influenced by factors such as the underlying price, strike price, time to expiry, volatility, and interest rates.

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More terms starting with "P"

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Participant-wise Open Interest

Exchange-published data breaking down total open interest by trader category — FII, DII, Pro, and Client — for a given segment.

Payoff Diagram

A chart plotting an option strategy's profit or loss against underlying price at expiry, showing breakeven and maximum risk.

Physical Settlement

A settlement method where an exercised option results in actual delivery of the underlying shares rather than a cash payment.

Position Sizing

The process of deciding how much capital or how many lots to risk on a single trade, based on account size and...

Pro (Proprietary Desk) Positioning

The trading positions held by brokerage and institutional proprietary desks trading their own capital rather than client money.

Protective Put

A strategy where a stockholder buys a put option to insure their position against a price decline.

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