Premium vs Protective Put

The upfront price paid by the option buyer to the option seller for the rights conveyed by the contract; the premium is the buyer's maximum possible loss if the option expires worthless; composed of intrinsic value and extrinsic (time) value.

A risk management strategy combining a long spot position with a purchased put option on the same asset; the put limits downside exposure below the strike price while preserving full upside above the strike minus the premium cost; the most defensible use of options for portfolio protection.