Crypto glossary
Option premium
The option premium is the price a buyer pays the seller for an option contract, made up of intrinsic value plus time value driven largely by volatility.
When someone buys a call or a put, they pay the seller an upfront premium. That premium has two parts. Intrinsic value is what the option would be worth if exercised now, for example 5,000 dollars for a call struck 5,000 dollars below the market. Time value is everything above that and reflects the chance the option gains value before expiry.
Time value grows with the time remaining and with implied volatility, which is why crypto options are usually far more expensive than equivalent stock options. On Deribit, bitcoin and ether options are quoted in the coin itself, so a premium of 0.05 BTC means one twentieth of a bitcoin per contract.
For a buyer the premium is the maximum loss; for a seller it is the maximum gain, against potentially large losses. Time value decays as expiry approaches, faster in the final days, so a buyer can be right about direction and still lose money if the move arrives too late or volatility drops.
Example
With ether at 3,000 dollars, a one-month call struck at 3,200 dollars might cost 0.03 ETH; all of that premium is time value because the option is still out of the money.