Sell To Close

What is 'Sell To Close'

Sell to close, in options trading, is an order to sell an option that you own and terminate your position. Sell to close specifies that you want to sell the option in order to close your existing long position in the option. This is in contrast to sell to open, which means you intend to initiate a short position in the option by writing it.

BREAKING DOWN 'Sell To Close'

The options market is unusual in that a retail investor can participate in the market by buying options and by writing options. It is important to correctly close out long options positions by specifying sell to close. If sell to open is specified instead, then the broker will enforce the margin requirement for a naked short while the original long position remains open.

RELATED TERMS
  1. Writing An Option

    The expression "writing an option" refers to the act of selling ...
  2. Sell To Open

    A phrase used by many brokerages to represent the opening of ...
  3. Short Leg

    Any contract in an option spread in which an individual holds ...
  4. Buy To Open

    A term used by many brokerages to represent the opening of a ...
  5. Long (or Long Position)

    1. The buying of a security such as a stock, commodity or currency, ...
  6. Back Fee

    A payment made to the writer of a compound option in the case ...
Related Articles
  1. Options & Futures

    Writing A Covered Call

    Writing an option is the process of selling to another investor the right, but not the obligation, to buy or sell a stock at a given price in the near future. It can also be referred to as shorting ...
  2. Options & Futures

    Types of Options

    There are many different types of options. In addition to general put options and call option, we will discuss 13 different types of options. Some of these option types are better suited to day ...
  3. Options & Futures

    Introduction - Day Trading and Options

    Options have not been a tradition part of day-trading strategy, but this is quickly changing.
  4. Options & Futures

    Stock Options: What's Price Got To Do With It?

    A thorough understanding of risk is essential in options trading. So is knowing the factors that affect option price.
  5. Options & Futures

    Getting Acquainted With Options Trading

    Learn more about stock options, including some basic terminology and the source of profits.
  6. Options & Futures

    Options Trading Volume And Open Interest

    Learn how these two statistics can give you an edge in trading options.
  7. Options & Futures

    How To Sell Put Options To Benefit In Any Market

    As long as the underlying stocks are of companies you are happy to own, put selling can be a lucrative strategy.
  8. Investing Basics

    Is it Risky to Invest in Options?

    Investing with options can be a great strategy, but you need to do your research first or the risks can outweigh the benefits.
  9. Options & Futures

    Cut Down Option Risk With Covered Calls

    A good place to start with options is writing these contracts against shares you already own.
  10. Options & Futures

    4 Reasons To Hold Onto An Option

    There are times when an investor shouldn't exercise an option. Find out when to hold and when to fold.
RELATED FAQS
  1. What do the phrases "sell to open", "buy to close", "buy to open", and "sell to close" ...

    The confusing terminology mentioned in the question deals with entering and exiting option orders. In review, there are two ... Read Answer >>
  2. Do options make more sense during bull or bear markets?

    Understand how options may be used in both bullish and bearish markets, and learn the basics of options pricing and certain ... Read Answer >>
  3. How can derivatives be used to earn income?

    Learn how option selling strategies can be used to collect premium amounts as income, and understand how selling covered ... Read Answer >>
  4. How do you trade put options on Ameritrade?

    Learn about option trading with TD Ameritrade. Explore the different types of options and their possible impacts on the investors ... Read Answer >>
  5. When does one sell a put option, and when does one sell a call option?

    The incorporation of options into all types of investment strategies has quickly grown in popularity among individual investors. ... Read Answer >>
  6. Are there any risks involved in trading put options through a traditional broker?

    Explore put option trading and different put option strategies. Learn the difference between traditional, online and direct ... Read Answer >>
Hot Definitions
  1. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage ...
  2. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  3. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  4. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  5. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  6. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
Trading Center