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What does “Buy to Open” Mean?

When trading options, the language is slightly different than other transactions. You might be “opening” or “closing” a position with each trade.

If you buy a put or call option, your ticket with say “buy to open” since you are opening a position and increasing the open interest on the underlying. Open interest is similar to trade volume in the stock markets, but it only increases with the number of outstanding positions interested in the outcome of the movements of the underlying security, and does not increase with each trade like trading volume.

Since some of the trades will “close” a position which was open, these will subtract from the aggregate open interest. If an investor decides to get out of his or her open position, he or she can sell the option to close the position, and the ticket would read “sell to close.” It is possible to “sell to open” if the sale creates an open short position. In that case, the investor would “buy to close.”

What does “Buy to Close” Mean?
What Does 'Buy to Cover' Mean?
What does “Buying on Weakness” Mean?

Keywords: options trading, sell to close, buy to close, aggregate open interest, sell to open, buy to open,
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