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Premium

Premium is the amount by which futures price exceeds the spot market price. For example, if the futures price is at $7,500 BTC/USD, and the spot price is at $7,000, the premium equals to $500 (7,500 – 7,000 = 500). A futures market traded at a premium is also known to be in contango.

The traders who are willing to go on long futures contracts even at a premium to the spot market, in essence, are overpaying the premium amount to those who go short against them accepting their bids.

Opposite term: discount

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