HDFC Bank Limited
Éducation

PCR Trading Strategies

54
The Role of Premium

The premium is the price you pay to buy the option.

Premium is influenced by:

Underlying price

Strike price

Time to expiry (more time = higher premium)

Volatility (higher volatility = higher premium)

Interest rates

Market demand

The buyer’s maximum loss is limited to the premium paid, but the seller’s risk can be much higher—sometimes unlimited.

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