Option premium
The option price the buyer pays the seller at the open. For a long option it is the maximum possible loss, whatever the market does.
Definition
The option premium is the price of the option, paid by the buyer to the seller — for a long option it is normally the maximum loss (plus costs). The premium consists of, among other things, intrinsic and time value; it rises with implied volatility and falls as time passes (theta), all else being equal.
Example
You buy a call for 2.50 USD (the premium). The stock never reaches the strike before expiry — the option expires worthless and you lose 2.50 USD per unit (× the contract multiplier). That is the known, capped cost of a long option.
Anti-example / common mistake
Comparing a “cheap” premium in absolute dollars without the context of delta, IV and time to expiry. Selling premium with no margin plan is the opposite pole of risk.