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Order types (to open / to close)

Options orders state intent: buy-to-open and sell-to-open start a position; buy-to-close and sell-to-close end one.

Every options order carries an intent: are you starting a position or ending one? "Buy to open" and "sell to open" begin a new position, while "buy to close" and "sell to close" flatten one you already hold. Your broker usually infers this, but selecting the wrong one can turn a closing trade into a brand-new position pointing the opposite way.

Say you sold a put for premium (sell to open). To exit before expiration, you "buy to close" that same contract, paying whatever it now trades for. If it has lost value, you keep the difference. Pick "buy to open" by mistake and you'd own a long put on top of your short one, doubling your exposure instead of erasing it.

The common slip-up happens with covered calls and cash-secured puts, where traders instinctively hit "sell" without checking whether they're opening or closing. Read the four labels before confirming, especially on a fast-moving day. A quick glance at your current positions afterward confirms the order did what you meant.

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Educational use only. Quotes are delayed ~15 minutes and nothing here is financial advice. Options trading involves substantial risk of loss.