ABSTRACT
For over-the-counter options, the terms of the option, including premiums, are negotiated between the purchaser and the option writer. The bank writing the option will specify what premium it will require for an option with given terms, but the customer can negotiate a lower premium by agreeing to a different strike price, or by agreeing to a European rather than an American-style option, etc. For exchange-traded options, premiums are the market prices at which they are purchased and sold.
