premium definition | Dictionary.com

pre⋅mi⋅um

[pree-mee-uh

–noun

1.	a prize, bonus, or award given as an inducement, as to purchase products, enter competitions initiated by business interests, etc.

2.	a bonus, gift, or sum additional to price, wages, interest, or the like.

3.	Insurance. the amount paid or to be paid by the policyholder for coverage under the contract, usually in periodic installments.

4.	Economics. the excess value of one form of money over another of the same nominal value.

5.	a sum above the nominal or par value of a thing.

6.	the amount paid to the lender of stock by the borrower, typically a short seller.

7.	the amount the buyer of a call or put option pays to the seller, quoted in dollars per share of stock.

8.	a fee paid for instruction in a trade or profession.

9.	a sum additional to the interest paid for the loan of money.

–adjective

10.	of exceptional quality or greater value than others of its kind; superior: a wine made of premium grapes.

11.	of higher price or cost.

12.	of or pertaining to premiums: to work in premium sales.

—Idiom

13.

at a premium,

a.	at an unusually high price.

b.	in short supply; in demand: Housing in that area is at a premium.

Origin:
1595–1605; < L praemium profit, reward

Synonyms:
2. reward. See bonus.

Dictionary.com Unabridged
Based on the Random House Dictionary, © Random House, Inc. 2009.
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pre·mi·um (prē'mē-əm)

A prize or award.
Something offered free or at a reduced price as an inducement to buy something else.
A sum of money or bonus paid in addition to a regular price, salary, or other amount.
The amount paid, often in addition to the interest, to obtain a loan.
The amount paid or payable, often in installments, for an insurance policy.
The amount at which something is valued above its par or nominal value, as money or securities.
The amount at which a securities option is bought or sold.
Payment for training in a trade or profession.
An unusual or high value: Employers put a premium on honesty and hard work.

adj. Of superior quality or value: premium gasoline.

[Latin praemium, inducement, reward : prae-, pre- + emere, to take, buy; see em- in Indo-European roots.]

The American Heritage® Dictionary of the English Language, Fourth Edition
Copyright © 2009 by Houghton Mifflin Company.
Published by Houghton Mifflin Company. All rights reserved.
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Premium

Pre"mi*um\, n.; pl. Premiums. [L. praemium, originally, what one has got before or better than others; prae before + emere to take, buy. See Redeem.]

1. A reward or recompense; a prize to be won by being before another, or others, in a competition; reward or prize to be adjudged; a bounty; as, a premium for good behavior or scholarship, for discoveries, etc.

To think it not the necessity, but the premium and privilege of life, to eat and sleep without any regard to glory. --Burke.

The law that obliges parishes to support the poor offers a premium for the encouragement of idleness. --Franklin.

2. Something offered or given for the loan of money; bonus; -- sometimes synonymous with interest, but generally signifying a sum in addition to the capital.

People were tempted to lend, by great premiums and large interest. --Swift.

3. A sum of money paid to underwriters for insurance, or for undertaking to indemnify for losses of any kind.

4. A sum in advance of, or in addition to, the nominal or par value of anything; as, gold was at a premium; he sold his stock at a premium.

Webster's Revised Unabridged Dictionary, © 1996, 1998 MICRA, Inc.
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premium (n.)

1601, "reward given for a specific act," from L. præmium "reward, profit derived from booty," from præ- "before" + emere "to buy," originally "to take" (see exempt). Insurance sense is 1661, from It. premio. Adj. sense of "superior in quality" is first attested 1928, originally in ref. to a grade of motor fuel.

Online Etymology Dictionary, © 2001 Douglas Harper
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Premium

1. The total cost of an option.

2. The difference between the higher price paid for a fixed-income security and the security's face amount at issue.

Investopedia Commentary

1. The premium of an option is basically the sum of the option's intrinsic and time value. It is important to note that volatility also affects the premium.

2. If a fixed-income security (bond) is purchased at a premium, existing interest rates are lower than the coupon rate. Investors pay a premium for an investment that will return an amount greater than existing interest rates.

premium

The price at which an option trades. The size of the premium is affected by various factors including the time to expiration, interest rates, strike price, and the price and price volatility of the underlying asset. Also called option premium.
The amount by which a bond sells above its face value.
The excess by which a warrant trades above its theoretical value.
The amount by which a convertible bond sells above the price at which the same bond without the convertible feature would sell.

Main Entry: pre·mi·um
Pronunciation: 'prE-mE-&m
Function: noun
1 : the difference between the face value or par value of a security and its market price when the latter is greater —compare DISCOUNT
2 : the price paid for an insurance contract equal to the cost per unit times the number of units

premium

see at a premium; put a premium on.

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