WHAT DOES BUY TO CLOSE AND SELL TO OPEN MEAN IN OPTIONS TRADING OF STOCKS? Thanks...?

Question

I UNDERSTAND THERE IS A WAY TO MAKE MONEY IF THE STOCK PRICE GOES DOWN. WHAT DOES BUY TO CLOSE AND SELL TO OPEN MEAN IN OPTIONS TRADING OF STOCKS?

Answer 1

Simply put, you're investing in the stock to go down.

Normally, you'd buy to open, hope that the price goes up, then sell to close.

If you thought the stock would go down, you'd do the opposite. Sell to pen first, have the stock price go down, then buy to close. You keep the difference minus commissions.

Options are different and a little more complex. In options, usually you use sell to open in conjunction with a buy to open on a different option. But you could just do what's called going naked.

You sell to open and buy to close a "put" option if you thought the stock was going up. Or you'd sell to open and buy to close a "call" option if you thought the stock would decrease.

This is the simple definition. Trading options takes more education, so be careful if you decide to do so. Because they are leveraged, you can lose money much, much faster with options if you don't know what you're doing. Education is the key for consistent success.

Best of luck. Hope that helps!

Answer 2

1

Answer 3

Buy to open simply means you are opening a position. Buy a call or put when you are not short. Buy to close = buying to close a position (buying the contracts to cover a short).
Sell to open = shorting
Sell to Close = selling out a long position.
there will also be a 'covered' option that you will check or select if you are selling calls and are long the common stock.
It sounds like you need to do a little more research before you venture into options trading. They can be tricky and should not be attempted before you understand them completly.
Good Luck to you!
joey

Answer 4

The term sell to open has two meaning depending on what you are selling. Normally you own 100 shares of stock and "sell to open" means for a sum of money you give the buyer the right to purchase you stock at a price, the strike price at some furture date. To reverse this contract you "buy to close" the contract and are thus able to keep your stock. Selling put options, called naked selling, have no underlying stock so you put up margin funds to insure you meet your obligations.

Answer 5

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WHAT DOES BUY TO CLOSE AND SELL TO OPEN MEAN IN OPTIONS TRADING OF STOCKS? Thanks...?
I UNDERSTAND THERE IS A WAY TO MAKE MONEY IF THE STOCK PRICE GOES DOWN. WHAT DOES BUY TO CLOSE AND SELL TO OPEN MEAN IN OPTIONS TRADING OF STOCKS?

Answer 6

In binary options you will have the possibility to predict the movement of various assets such as stocks, currency pairs, commodities and indices. Learn how you can make money trading binary options https://tinyurl.im/aH4vq An option has only two outcomes (hence the name "binary" options). This is because the value of an asset can only go up or down during a given time frame. Your task will be to predict if the value of an asset with either go up or down during a certain amount of time.

Answer 7

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<<>> You would have $4,500 paid to your account. Your margin requirement should be $4,000 as long as you hold the long calls since you can cover the short stock position at any time for $4,000. Since you sold the stock for $4,500 you have at least $4,500 in margin available so there is no additional margin requirement. However, the fact that there is no requirement/reason for your brokerage to require any additional margin does not necessarily mean that they do not. Each brokerage is allowed to set higher margin requirements than the SEC specified minimums. Sometimes brokerages have strange requirements, so you should check with the particular brokerage you use. <<>> No, it is not correct. The short stock position and the long call position are offsetting so you still have a valid spread. However, it is now a bearish spread instead of a bullish spread. If the stock goes up, it does not matter how high it goes. You can still exercise your call position to buy the stock for $40 per share. There is no upside risk. If the stock drops significantly, the profit from your short stock position will go up faster than the loss from your long call position. In fact, about the best thing that could happen for you is for the stock to drop to $0.01 per share. Your long call would expire worthless and you could cover your short stock position for $0.01 per share, giving you a profit on the stock of $44.99 per share. <<>> Neither of the concerns you mention is a problem. However, there is one potential concern you should understand if the stock pays a dividend. If you are short the stock when it goes ex-dividend you are required to pay the dividend. So, it is possible that the holder of the option at $45 could exercise it the day before the stock goes ex-dividend, in which case you would not receive the assignment notice until the following day after the stock is ex-dividend. That is the only significant risk you have from an early assignment. You can avoid this problem by avoiding call spreads on stocks with significant dividends or by closing spreads before the stock goes ex-dividend.

Answer 8

The secret word of trading success is "organized". You can't be successful without a strategy, a plan and some kind of technological support. I use a software called "autobinary signals" that is helping me a lot. There are plenty of them on the market. I recommend this one because it's very easy to use (you don't have to be an expert or have special skills to make money with it).

Check it out here. It's worth it: http://www.goobypls.com/r/rd.asp?gid=551
Cheers.

Answer 9

Buy To Close

Answer 10

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