Premium (Investment)

When someone says "shares are trading at a premium to their offer price" it means investors who bought shares in a new issue are doing O.K!

But the above is only part of the definition of the term 'premium' - take your pick from below:

• The difference between the par value of a security and a higher issue price.
• The difference between the issue price of a security and the higher price it actually commands in the market (NB: if the market price is lower, the difference between the two is described as the discount ).
• The cost of purchasing a traded option conferring the right to buy or sell a security at a pre-determined price.
• The excess price of one futures market contract over another or over the cash market price of the underlying security behind the futures contract.

See Also: Online share dealing service Stockmarket Centre

Last Updated: November 2007 © Moneyextra.com

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