Buying and Selling an Option

Buying and Selling an Option It’s important to know exactly how the actions you take will get you closer to meeting your goals:

• Buying to open an options position means that you’re purchasing the contract. You’re the owner, and have the right to place an order to sell the contract back into the market, to exercise the contract, or to let it expire.

• Selling to close a position means that you’re selling a contract that you own back into the market.

• Selling to open an options contract means that you’re selling the contract to a buyer to collect a premium. You have the obligation to make good on the contract if you’re assigned, or you could buy it back in the market.

• Buying to close an options position means that you’re buying back a contract that you sold. In this case, you cannot be assigned on the contract you initially sold.