Opening Transaction

Definition of 'Opening Transaction'


The act of initiating a trade. An opening transaction is the initial step in a trading activity that involves the purchase or sale of a financial instrument or other asset. It generally - but not always - involves a closing transaction at a later point in time, which may be on the same day for an intra-day trade or days, weeks or months later for a longer-term trade. The term is most frequently used with reference to options trades.

Investopedia explains 'Opening Transaction'


An opening transaction would involve the purchase of a security when initiating a long position and the sale of a security when initiating a short sale or short position.

The difference between the prices for the opening and closing transactions represents the gross profit or loss for the trader or investor. For example, if an opening transaction involves the (short) sale of 1,000 shares of a stock that is trading at $10.00, and the closing transaction involves the purchase of 1,000 shares at $9.00, the gross profit on this trade would be $1,000.


Filed Under:

comments powered by Disqus
Hot Definitions
  1. Federal Reserve Note

    The most accurate term used to describe the paper currency (dollar bills) circulated in the United States. These Federal Reserve Notes are printed by the U.S. Treasury at the instruction of the Federal Reserve member banks, who also act as the clearinghouse for local banks that need to increase or reduce their supply of cash on hand.
  2. Benchmark Bond

    A bond that provides a standard against which the performance of other bonds can be measured. Government bonds are almost always used as benchmark bonds. Also referred to as "benchmark issue" or "bellwether issue".
  3. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying a company's shares outstanding by the current market price of one share. The investment community uses this figure to determine a company's size, as opposed to sales or total asset figures.
  4. Oil Reserves

    An estimate of the amount of crude oil located in a particular economic region. Oil reserves must have the potential of being extracted under current technological constraints. For example, if oil pools are located at unattainable depths, they would not be considered part of the nation's reserves.
  5. Joint Venture - JV

    A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity. In a joint venture (JV), each of the participants is responsible for profits, losses and costs associated with it.
  6. Aggregate Risk

    The exposure of a bank, financial institution, or any type of major investor to foreign exchange contracts - both spot and forward - from a single counterparty or client. Aggregate risk in forex may also be defined as the total exposure of an entity to changes or fluctuations in currency rates.
Trading Center