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Buying to open is when you purchase a new options contract and assume either a long or short position. Conversely, buying to close is when you purchase an existing options contract that matches a ...
Options trading entails some obscure terminology. One essential concept traders should learn about this market is "sell to open" vs. "sell to close."
An alternate name is "alligator spread," derived from the large number of trades required to open and close them "eating" one's profit via commission fees. Box spreads are usually only opened with European options, whose exercise is not allowed until the option's expiration. Most other styles of options, such as American, are less suitable ...
In finance, an option is a contract which conveys to its owner, the holder, the right, but not the obligation, to buy or sell a specific quantity of an underlying asset or instrument at a specified strike price on or before a specified date, depending on the style of the option.
The trader may also forecast how high the stock price may go and the time frame in which the rally may occur in order to select the optimum trading strategy for buying a bullish option. The most bullish of options trading strategies, used by most options traders, is simply buying a call option. The market is always moving.
A covered option is a financial transaction in which the holder of securities sells (or "writes") a type of financial options contract known as a "call" or a "put" against stock that they own or are shorting. The seller of a covered option receives compensation, or "premium", for this transaction, which can limit losses; however, the act of ...
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