Buy a call option to open. Buy To Open (BTO) is the most basic trading order all options trading beginners must know. Buy To Open is to be used when buying options, no matter call or put options. Yes, you Buy To Open call options and Buy To Open put options as well. A lot of beginners misunderstand buying put options as "shorting the stock" and.

Buy a call option to open

What is the meaning of "Sell to Open"?

Buy a call option to open. If you were to exercise your call option after the earnings report, you invoke your right to buy shares of XYZ stock at $40 each and can sell them immediately in the open market for $50 a share. This gives you a profit of $10 per share. As each call option contract covers shares, the total amount you will receive from.

Buy a call option to open


Buy to open is a term used by brokerages to represent the opening of a long call or put position in option transactions. A "buy to open" order has a distinguishing characteristic where the option position is not held short in the account during the transaction. The "sell to close" order is used to exit a position taken with a "buy to open" order. Instead of simply placing a "buy" or "sell" order as they would for stocks, options traders must choose among "buy to open," "buy to close," "sell to open" and "sell to close.

Buy to open applies to stocks as well. When an investor decides to establish a new position in a particular stock, the first buy transaction is considered buy to open because it opens the position. By opening the position, the stock is being established as a holding in the portfolio. The position remains open until it is closed out by selling all of the stocks. This is known as selling to close because it closes the position. Selling a partial position means that some, but not all, stocks have been sold.

A position is considered closed when no more of a particular stock, or exposure to it, remain in a portfolio.

Buy to close orders also come into play is when covering a short-sell position. A short-sell position borrows the shares through the broker and is closed out by buying back the shares in the open market. The last transaction to completely close out the position is known as the buy to close order. This removes the exposure completely. The intent is to buy back the shares at a lower price to generate a profit from the difference of the short-sell price and the buy to close price.

In some cases, where the share price moves higher, the trader may have to buy to close at a loss to prevent even greater losses from occurring. In the worst case scenarios, the broker may execute a forced liquidation due to a margin call -- a broker's demand that an investor place money in his margin account due to a short fall -- which would generate a buy to cover order to close out the position at a magnified loss due to insufficient account equity.

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Become a day trader. Buy To Open Share. What is 'Buy To Open' Buy to open is a term used by brokerages to represent the opening of a long call or put position in option transactions. Buy to Close Buy to close orders also come into play is when covering a short-sell position. Get Free Newsletters Newsletters.


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