Discount/Premium Options

[Guru Dudette]

Discount/Premium

Discount/Premium can be thought of as an index that oscillates above and below a horizontal line representing the item's intrinsic value. When it can be measured, the presence of the premium or discount usually indicates the direction of the trend.

For example, something bought at a premium indicates the trend, or liklihood of its intrinsic value, being increased over time. As a rule of thumb, the average closed-end fund discount/ premium published each week in Barron's is probably a good gage for the broader market.