Option premium is the price that the option buyer pays to the option seller for the right to buy or sell a particular asset at a specific price in the future. In other words, it is the cost of buying an option contract. The seller collects a payment, known as a premium, from the buyer in return for granting the option. The premium amount is determined by various factors, including the current price of the stock, the options type, strike price, and expiration date, and implied volatility. The premium can be composed of intrinsic value, extrinsic value, or both, depending on whether the option is in-the-money or out-of-the-money. The net option premium is the total amount an investor or trader will pay for selling one or more options and at the same time purchasing others.