Spot Premium


Spot Premium

The money an investor pays to a broker in order to purchase a single payment options trading (SPOT) option. With a SPOT option (also called a binary option) the investor chooses the payout he wants and the market conditions he wants to occur in order to receive that payout. The broker then sets a premium for the option based on the probability of the investor’s predictions occurring.

The spot premium is usually a percentage of the payout. After the broker sets the premium, the investor can choose to go ahead and buy the option if she is satisfied with the price, or to decline if she thinks the price is too high. If the payout conditions do occur, the investor collects his payout. If they not occur, the investor will lose the spot premium. However, no matter what happens in the market, the most she can lose is the spot premium.


Investment dictionary. . 2012.

Look at other dictionaries:

  • premium — consideration paid for an insurance policy. Glossary of Business Terms (1) The additional payment allowed by exchange regulation for delivery of higher than required standards or grades of a commodity against a futures contract. (2) In speaking… …   Financial and business terms

  • Premium — (1) Amount paid for a bond above the par value. (2) The price of an option contract; also, in futures trading, the amount the futures price exceeds the price of the spot commodity. Related: inverted market premium payback period. Also called… …   Financial and business terms

  • premium — 1) The consideration payable for a contract of insurance or life assurance. 2) An amount in excess of the nominal value of a share, bond, or other security. 3) An amount in excess of the issue price of a share or other security. When dealings… …   Big dictionary of business and management

  • Forward premium — The term forward premium, as used in currency trading, refers to the premium (or discount) resulting from a forward contract to be executed in the future at a forward rate. The premium is calculated as follows:((forward rate spot rate)/spot… …   Wikipedia

  • Forward Premium — When dealing with foreign exchange (FX), a situation where the spot futures exchange rate, with respect to the domestic currency, is trading at a higher spot exchange rate then it is currently. A forward premium is frequently measured as the… …   Investment dictionary

  • National Spot Exchange — Ltd Type Private Industry Business Services Founded 2005 Headquarters Mumbai …   Wikipedia

  • The She Spot — Infobox Book name = The She Spot author = Lisa Witter and Lisa Chen country = United States language = English genre = Non fiction publisher = Berrett Koehler Publishers release date = June 1, 2008 media type = Print (Hardback) pages = 288 pp.… …   Wikipedia

  • Single Payment Options Trading - SPOT — A type of option product that allows an investor to set not only the conditions that need to be met in order to receive a desired payout, but also the size of the payout he or she wishes to receive if the conditions are met. The broker that… …   Investment dictionary

  • Forward premium — A currency trades at a forward premium when its forward price is higher than its spot price. The New York Times Financial Glossary …   Financial and business terms

  • forward premium — A currency trade at a forward premium when its forward price is higher than its spot price. Bloomberg Financial Dictionary …   Financial and business terms


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