Premium
The price paid by the option buyer to the option seller for the rights granted by the contract.
Premium = Intrinsic Value + Time Value
The premium is the market price of an options contract. The buyer pays it upfront; the seller receives it as immediate income. For a call or put on 100 shares, the total cost is premium × 100.
Premium is composed of two parts: intrinsic value (how much the option is in the money) and time value (the optionality remaining before expiry, influenced by implied volatility and time to expiration).
The premium is the buyer's maximum possible loss. The seller's maximum gain is capped at the premium received.
On the desk
Buying calls into an event can lose money even if the underlying rises, if implied volatility collapses after the print. That is a premium problem, not a ‘the market was wrong’ problem.