Premium is the actual cost of the option that the buyer of the option pays to the seller of the option. In some cases, the option may have both intrinsic value and time value.
Expiration is the last day to either exercise the option or to close out one’s option position. For most ordinary options, this expiration occurs on the third Saturday of every month, with the third Friday being the last trading day for options.
Open Interest is simply described as the number of open buy orders. If Person A buys 5 options from Person B, the open interest is 5. In addition, if Person C buys 10 options from Person D, the open interest is now 15. If Person A sells 3 options and Person D buys them, the new open interest is 12. In essence, Person A has close his position by 3 by having an offsetting transaction with Person D. If Person E buys 5 contracts from Person C, the open interest remains at 12 because Person C has an offsetting transaction of 5 while Person E establishes a new position. There is no net change in the number of open buy orders.
