{"id":29,"date":"2015-01-06T16:35:51","date_gmt":"2015-01-06T21:35:51","guid":{"rendered":"\/?p=29"},"modified":"2016-07-05T15:48:41","modified_gmt":"2016-07-05T19:48:41","slug":"order-actions","status":"publish","type":"post","link":"https:\/\/www2.stockmarketwatch.com\/learn\/options\/basics\/order-actions\/","title":{"rendered":"06) Order Actions"},"content":{"rendered":"

In this lesson, we will be taking a look at the different types of order actions. \u00a0If you\u2019re new to options trading, these can be a bit confusing at first, but I assure you it\u2019s a rather straightforward concept and you should up able to pick it up rather quickly.<\/p>\n

The 4 order actions we\u2019ll be looking at are\u2026<\/p>\n

    \n
  1. Buy to Open<\/li>\n
  2. Buy to Close<\/li>\n
  3. Sell to Open<\/li>\n
  4. Sell to Close<\/li>\n<\/ol>\n

     <\/p>\n

    Buy to Open<\/b><\/h2>\n

    A \u201cBuy to Open<\/b>\u201d order is the most common way to start a new options trade. \u00a0It means that you are BUY<\/b>ing contracts to OPEN <\/b>a new options trade.<\/p>\n

    If you are familiar with stock trading, this is virtually the same as a \u201cBUY\u201d order for purchasing shares of stock. \u00a0You would Buy to Open contracts you wish to INCREASE in price.<\/p>\n

     <\/p>\n

    Buy to Close<\/b><\/h2>\n

    Next up, the \u201cBuy to Close<\/b>\u201d is an order type that would be used to BUY <\/b>to cover contracts that you are short and therefore be CLOSING <\/b>your \u201cshort\u201d. \u00a0So, that means when you OPENed this trade, you used the order type \u201cSell to Open\u201d.<\/p>\n

    If you are familiar with stock trading this is about the same as \u201cBuy to Cover\u201d.<\/p>\n

    Sell to Open<\/b><\/h2>\n

    So, let\u2019s look at the \u201cSell to Open<\/b>\u201d order type. \u00a0Like I was saying this is opening a new short position. \u00a0You are SELL<\/b>ing option contracts to OPEN <\/b>a new position. \u00a0This would result in you having a negative amount of contracts. \u00a0In stock trading this would be called \u201cshort selling\u201d. \u00a0You would Sell to Open contracts you believe to DECREASE in price.<\/p>\n

    Sell to Close<\/b><\/h2>\n

    And, finally there\u2019s the \u201cSell to Close<\/b>\u201d order, which is the most common \u201cclosing\u201d order type. \u00a0After you have acquired contracts via the \u201cBuy to Open\u201d order type, you SELL <\/b>those contracts to CLOSE <\/b>that position.
    \nWith stock trading, this is simply called a \u201cSELL\u201d order.<\/p>\n