The amount paid to the option seller or writer for assuming the risk that he or she may have to buy (for puts) an underlying security for more than the market price or sell (for calls) at less than the market price. The amount by which a preferred stock or bond may sell above its par value. In the case of a new issue of bonds or stocks, premium is the amount the market price rises over the original selling price. May also refer to that part of redemption price of a bond or preferred stock in excess of par.