Buy to Close vs. Buy to Open: What Every Trader Needs to Know
Learn the difference between buy to close and buy to open orders.
What is Buy to Open?
When you buy to open an option, you are opening a new long call or long put position.
For example, if you want to bet on the price of an underlying stock increasing, you can buy to open a call option instead of purchasing the 100 shares outright.
If you own 100 shares or more of a stock, you can buy to open a put option to limit your losses in case the stock falls.
What is Buy to Close?
A buy to close order is used when you want to close an existing position.
An excellent example is when you have a covered call and want to close it early to lock in a profit and roll it to a different expiration.
Buy to Close vs. Buy to Open: Bottom Line
Understanding the difference between a buy to close and a buy to open order ensures your broker understands what type of position you are trying to make.
How to Learn More About Options Trading
If you want to learn more about options trading and becoming a profitable trader, you can join the Haikhuu Trading community for free!
Haikhuu Trading offers daily live calls, morning reports, access to a team of professional traders, and an AI trading bot that provides stock trading alerts. Don’t miss the opportunity to elevate your trading skills — join Haikhuu Trading today!
Before you go
You can get all my stories sent directly to your inbox by clicking here!
If you enjoy reading stories like these and want to support me as a writer, consider becoming a Medium member. The membership is $5 a month, giving you unlimited access to stories on Medium. If you sign up using my link, I’ll earn a small percentage. This story contains affiliate links that I may be compensated for if you click on them.
