Premium

(i) In options the premium is the cost of the option and that is the specific amount at risk to the buyer. The premium is usually calculated on the Black-Scholes model. For the grantor, or writer, of options the attraction is the premium income.

(ii) A premium is normally charged for extra quality on bars over 995 fine.

(iii) A premium is also normally charged on the manufacturing costs of bars smaller than the 400 ounce (12.5 kilogram) good delivery bars, in other words, such bars as kilobars and ten tola bars.

(iv) A premium over loco London may also be charged for bars c.i.f. certain locations, such as regional markets like Dubai or Singapore.

(v) The percentage mark-up over the actual gold content of a coin or small bar. Bullion coins were conceived to keep this premium as low as possible.