#758 - What Does Buy To Open Mean In Options?

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Manage episode 244708551 series 1615906
By Kirk Du Plessis. Discovered by Player FM and our community — copyright is owned by the publisher, not Player FM, and audio is streamed directly from their servers. Hit the Subscribe button to track updates in Player FM, or paste the feed URL into other podcast apps.

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question, “What does buy to open mean in options?” Buy to open, buy to close, sell to open, sell to close, all very confusing terminology when you start getting into the world of options trading. Now, this is different than stock trading because what most people are used to is simply just buy stock at a low price and sell stock at a high price. But in the world of options trading, you have all these different terminologies for how the account position is starting to change and evolve. Buy to open basically means exactly what it sounds like. That is you are buying options, either net options, a spread, you’re buying a spread or you’re buying individual option contracts and you are opening a position and you have a new position open that needs to be closed in the future. Now, this is important because in the world of options trading as in the world of stock trading though it’s just not as traditional, you can actually sell to open a contract which means that in order to complete the trading loop, you would have to buy to close. That’s how this differential kind of works out. There’s usually just four types. You can buy to open or sell to open and then of course, you have to sell to close or buy to close to complete the trading loop for each of these types. Hopefully this helps out. Again, as always, if you guys have any more questions, let us know and until next time, happy trading.

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