Been trading for a while but still confused about this term. I see sell to close everywhere but not sure what it actually means.
Is it different from just selling an option? When would you use it versus other types of orders?
Tried looking it up but getting mixed explanations online.
Last month I bought Apple calls and freaked out when they tanked 40%. Almost held too long but remembered to sell before expiration.
You’re just selling back the contract you bought. Like returning something to a store.
My biggest mistake early on? Not getting this and watching winners turn into losers.
Sell to close means closing out an option position. It is when an option you previously bought is sold to exit the trade.
Options generally have four moves: Buy to open to start a long position, sell to close to end a long position, sell to open to start a short position, and buy to close to end a short position.
Many retail traders prefer the buy to open and sell to close actions since they typically buy options first then sell them later.
It’s simply selling an option you already purchased to close your position.
It is the opposite of buy to open. You sell the contract you own at the bid price to exit. This action is labeled as ‘sell to close’ as it closes a long position.
When you buy an option, you’ve got to get out of it somehow. “Sell to close” means you’re selling back the contract you own to exit and grab whatever profit or loss you’ve got.
It’s like buying a stock then selling it later - same idea but with options. You’re not starting something new, just closing what you already have.
This video explains all the option order types really well:
Most beginner trades are just buy to open, then sell to close. Keep it simple until you’ve nailed the basics.