Been trading for a while but keep seeing this term everywhere. I’m honestly not sure what it means.
I saw it mentioned in trading discussions and feel like I should understand it by now. I don’t want to make mistakes because I missed something basic.
It would be helpful to know when this actually matters in real trading situations.
It means you’re selling options to open a position. It’s key when expecting price drops.
Pocket Option doesn’t use this term since we’re focused on binary options, not traditional options. It helps to understand the concept if you switch platforms later. Selling to open means collecting premium upfront while betting the option will expire worthless. The downside is that there’s unlimited risk; prices can move against you significantly. With binary options, your risk is capped at your investment, so no unexpected margin calls or assignments.
Took me months to figure this out when I started options trading.
Sell to open means you’re creating a new short position by selling an option contract first. You collect premium upfront and hope it expires worthless.
I learned this the hard way when I accidentally sold a call option on Apple without owning the stock. That mistake cost me $340 when the price shot up.
Think of it as starting a trade by selling first instead of buying. Most people buy then sell, but sell to open flips that around.
Basically you’re betting the option will lose value or expire worthless. The premium you collect upfront is yours to keep if you’re right.
Just be careful with the risk involved. Unlike buying options where you can only lose what you paid, selling can lead to bigger losses if the trade goes wrong.
Options markets use four order types:
• Buy to open - start long position
• Sell to close - exit long position
• Sell to open - start short position
• Buy to close - exit short position
Matters for position tracking and margin requirements.